**As filed with the Securities and Exchange Commission on May 11, 2011**

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 20-F/A**

**(AMENDMENT NO. 1)**

 

**(Mark One)**

 

| **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**                                             |

 

Commission file 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) |

 

Securities registered 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                      |

 

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

 

----

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: **None**

 

Number of Limited Partnership Units outstanding as of December 31, 2010: **112,964,451**

 

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

x Yes   o No

 

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

o Yes   x No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

 

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

x Yes   o No

 

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

 

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

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

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

 

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

o Item 17   o Item 18

 

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

o Yes   x No

 

----

 

**EXPLANATORY NOTE**

 

This Amendment No. 1 on Form 20-F/A (this “Form 20-F/A”) is being filed by Brookfield Infrastructure Partners L.P. (the “Registrant”) to amend the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2010, filed with the Securities and Exchange Commission on April 26, 2011 (the “Form 20-F”).  This Form 20-F/A is being filed solely to supplement Item 18 of the Form 20-F with the inclusion of the financial statements of Prime Infrastructure Holdings Limited for the period ended December 31, 2010 (the “Prime Financial Statements”).

 

As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Form 20-F/A.  This Form 20-F/A also includes Exhibit 15.2, which contains the consent of Deloitte Touche Tohmatsu with respect to the Prime Financial Statements.

 

This Form 20-F/A consists solely of a cover page, this explanatory note, the Prime Financial Statements, updated certifications of our principal executive officer and our principal financial officer, Exhibit 15.2 and a signature page.

 

Except as described above, this Form 20-F/A does not amend, update or restate the information in any other item of the Form 20-F, or reflect any events that have occurred after the original filing of the Form 20-F.

 

2

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**ITEM 18. FINANCIAL STATEMENTS**

 

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

 

(1)   Audited Consolidated Financial Statements as of December 31, 2010 and June 30, 2010 and for the six month period ended December 31, 2010 and the year ended June 30, 2010 for Prime Infrastructure Holdings Limited.

 

3

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Prime Infrastructure Holdings Limited

 

ACN 100 364 234

 

Audited Consolidated Financial Statement as of December 31, 2010 and June 30, 2010 and for the six month period ended December 31, 2010 and the year ended June 30, 2010

 

4

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| ** **                                       | ** ** | **Page number** |
|--------------------------------------------------|------------|----------------------|
|                                             |       |                 |
| Consolidated   Income Statement                  |       | 6                    |
|                                             |       |                 |
| Consolidated   Statement of Comprehensive Income |       | 7                    |
|                                             |       |                 |
| Consolidated   Statement of Financial Position   |       | 8 -9                 |
|                                             |       |                 |
| Consolidated   Statement of Changes in Equity    |       | 10 -11               |
|                                             |       |                 |
| Consolidated   Statement of Cash Flows           |       | 12                   |
|                                             |       |                 |
| Notes to the   Consolidated Financial Statements |       | 13 -80               |
|                                             |       |                 |
| Independent   Audit Report                       |       | 81                   |

 

5

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CONSOLIDATED INCOME STATEMENT

for the period ended 31 December 2010

 
| ** **                                                                                              | ** ** | ** ** | ** ** | **Consolidated**                                      | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **Note**   | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| Revenue                                                                                                 |       | 4          |       | 254,044                                               |       | 499,231 |   |
| Other income                                                                                            |       | 6(a        | )          | 25,339                                                |       | 404,889 |   |
| **Total income**                                                                                        | ** ** | ** ** | ** ** | **279,383**                                           | ** ** | **904,120** | ** ** |
| Share of losses from associates and jointly controlled entities accounted   for using the equity method |       | 13         |       | (13,329                                               | )          | (185,055 | ) |
| Employee benefit expense                                                                                |       |       |       | (39,993                                               | )          | (80,646 | ) |
| Transmission and direct costs                                                                           |       |       |       | (79,717                                               | )          | (131,515 | ) |
| Depreciation, amortisation and impairment charge                                                        |       | 6(b        | )          | (44,609                                               | )          | (128,818 | ) |
| Finance costs                                                                                           |       | 5(a        | )          | (52,897                                               | )          | (164,207 | ) |
| Operating and management charges                                                                        |       |       |       | (28,396                                               | )          | (58,368 | ) |
| Net hedge gain                                                                                          |       | 5(b        | )          | 12,020                                                |       | 19,650 |   |
| Impairment of related party loans                                                                       |       | 6(b        | )          | (21,507                                               | )          | (95,658 | ) |
| Foreign exchange loss and other expense                                                                 |       |       |       | (96,328                                               | )          | (46,267 | ) |
| **Total expense**                                                                                       | ** ** | ** ** | ** ** | **(364,756**                                          | **)**      | **(870,884** | **)** |
| **(Loss)/profit before income tax expense**                                                             | ** ** | ** ** | ** ** | **(85,373**                                           | **)**      | **33,236** | ** ** |
| Income tax benefit/(expense)                                                                            |       | 7          |       | 12,210                                                |       | (941 | ) |
| **(Loss)/profit from continuing operations**                                                            | ** ** | ** ** | ** ** | **(73,163**                                           | **)**      | **32,295** | ** ** |
| Loss from discontinued operations                                                                       |       | 33         |       | (6,307                                                | )          | (980,892 | ) |
| **Loss for the period**                                                                                 | ** ** | ** ** | ** ** | **(79,470**                                           | **)**      | **(948,597** | **)** |
| **Attributable to:**                                                                                    |       |       |       |                                                  |       |   |   |
| Equity holders of the parent entity                                                                     |       |       |       | (80,464                                               | )          | (959,457 | ) |
| Non-controlling interest                                                                                |       |       |       | 994                                                   |       | 10,860 |   |
| ** **                                                                                              |       |       | ** ** | **(79,470**                                           | **)**      | **(948,597** | **)** |

 

Notes to the Consolidated Financial Statements are included on pages 10 to 77.

 

6

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the period ended 31 December 2010

 
| ** **                                                                             | ** ** | ** ** | ** ** | **Consolidated**                                      | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------|------------|
| ** **                                                                             | ** ** | **Note**   | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **Loss for the period**                                                                | ** ** | ** ** | ** ** | **(79,470**                                           | **)**      | **(948,597** | **)** |
| **OTHER COMPREHENSIVE INCOME**                                                         |       |       |       |                                                  |       |   |   |
| Other comprehensive income reclassified from equity relating to assets   held for sale |       |       |       | 16,444                                                |       | 36,810 |   |
| Exchange differences arising on translation of foreign operations                      |       |       |       | (69,149                                               | )          | 26,024 |   |
| Transfer of reserves to profit or loss on disposal of operations                       |       |       |       | —                                                |       | (35,672 | ) |
| Gain/(loss) on cash flow hedges taken to equity                                        |       |       |       | 25,975                                                |       | (23,033 | ) |
| Gain on cash flow hedges transferred to income                                         |       |       |       | —                                                |       | 27,971 |   |
| Other reserves recognised in the period                                                |       |       |       | (349                                                  | )          | 24,035 |   |
| Share of other comprehensive income of associates                                      |       |       |       | 28,324                                                |       | (61,243 | ) |
| Income tax relating to components of other comprehensive income                        |       |       |       | (5,257                                                | )          | 9,938 |   |
| **Other comprehensive (expense)/income for the period**                                | ** ** | ** ** | ** ** | **(4,012**                                            | **)**      | **4,830** | ** ** |
| **Total comprehensive expense for the period**                                         | ** ** | ** ** | ** ** | **(83,482**                                           | **)**      | **(943,767** | **)** |
| **Total comprehensive expense attributable to:**                                       |       |       |       |                                                  |       |   |   |
| Owners of the parent                                                                   |       |       |       | (84,476                                               | )          | (954,627 | ) |
| Non-controlling interests                                                              |       |       |       | 994                                                   |       | 10,860 |   |
| ** **                                                                             | ** ** | ** ** | ** ** | **(83,482**                                           | **)**      | **(943,767** | **)** |

 

Notes to the Consolidated Financial Statements are included on pages 10 to 77.

 

7

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2010

 
| ** **                                                                            | ** ** | ** ** | ** ** | **Consolidated**               | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------|------------|
| ** **                                                                            | ** ** | **Note**   | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **CURRENT ASSETS**                                                                    |       |       |       |                           |       |   |   |
| Cash and cash equivalents                                                             |       | 37(a       | )          | 42,596                         |       | 430,752 |   |
| Trade and other receivables                                                           |       | 8          |       | 54,712                         |       | 82,130 |   |
| Other financial assets                                                                |       | 9          |       | 34,852                         |       | 67,030 |   |
| Inventories                                                                           |       | 10         |       | 13,156                         |       | 14,713 |   |
| Current tax receivables                                                               |       | 7          |       | 10                             |       | 10 |   |
| Other                                                                                 |       | 11         |       | 13,208                         |       | 8,300 |   |
| Non-current assets classified as held for sale                                        |       | 33         |       | 1,825,912                      |       | 1,913,118 |   |
| **Total current assets**                                                              | ** ** | ** ** | ** ** | **1,984,446**                  | ** ** | **2,516,053** | ** ** |
| **NON-CURRENT ASSETS**                                                                |       |       |       |                           |       |   |   |
| Trade and other receivables                                                           |       | 8          |       | 4,017                          |       | 4,917 |   |
| Other financial assets                                                                |       | 9          |       | 756,790                        |       | 898,541 |   |
| Debt service reserve deposit                                                          |       | 12         |       | 26,361                         |       | 29,853 |   |
| Investments accounted for using the equity method                                     |       | 13         |       | 403,012                        |       | 397,988 |   |
| Property, plant and equipment                                                         |       | 14         |       | 1,716,181                      |       | 1,734,717 |   |
| Investment property                                                                   |       | 15         |       | —                         |       | — |   |
| Goodwill                                                                              |       | 16         |       | 139,767                        |       | 160,893 |   |
| Other intangible assets                                                               |       | 17         |       | 5,102                          |       | 6,565 |   |
| Deferred tax assets                                                                   |       | 7          |       | 250,848                        |       | 249,078 |   |
| Other                                                                                 |       | 11         |       | 76,284                         |       | 77,144 |   |
| **Total non-current assets**                                                          | ** ** | ** ** | ** ** | **3,378,362**                  | ** ** | **3,559,696** | ** ** |
| **Total assets**                                                                      | ** ** | ** ** | ** ** | **5,362,808**                  | ** ** | **6,075,749** | ** ** |
| **CURRENT LIABILITIES**                                                               |       |       |       |                           |       |   |   |
| Trade and other payables                                                              |       | 18         |       | 125,611                        |       | 160,095 |   |
| Borrowings                                                                            |       | 19         |       | 11,884                         |       | 721,650 |   |
| Other financial liabilities                                                           |       | 20         |       | 1,380                          |       | 4,859 |   |
| Current tax payable                                                                   |       | 7          |       | 2,020                          |       | 847 |   |
| Provisions                                                                            |       | 21         |       | 6,010                          |       | 6,190 |   |
| Other                                                                                 |       | 22         |       | 36,441                         |       | 34,088 |   |
| Liabilities directly associated with non-current assets classified as   held for sale |       | 33         |       | 1,852,412                      |       | 1,958,130 |   |
| **Total current liabilities**                                                         | ** ** | ** ** | ** ** | **2,035,758**                  | ** ** | **2,885,859** | ** ** |

 

8

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 December 2010

 
| ** **                                                                                           | ** ** | ** ** | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------|------------|
| ** **                                                                                           | ** ** | **Note**   | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **NON-CURRENT LIABILITIES**                                                                          |       |       |       |                           |       |   |   |
| Trade and other payables                                                                             |       | 18         |       | 14,876                         |       | 16,223 |   |
| Borrowings                                                                                           |       | 19         |       | 940,622                        |       | 567,455 |   |
| Other financial liabilities                                                                          |       | 20         |       | 81,649                         |       | 152,001 |   |
| Deferred tax liabilities                                                                             |       | 7          |       | 57,880                         |       | 61,173 |   |
| Provisions                                                                                           |       | 21         |       | 3,789                          |       | 4,315 |   |
| Other                                                                                                |       | 22         |       | 157,954                        |       | 153,570 |   |
| **Total non-current liabilities**                                                                    | ** ** | ** ** | ** ** | **1,256,770**                  | ** ** | **954,737** | ** ** |
| **Total liabilities**                                                                                | ** ** | ** ** | ** ** | **3,292,528**                  | ** ** | **3,840,596** | ** ** |
| **Net assets**                                                                                       | ** ** | ** ** | ** ** | **2,070,280**                  | ** ** | **2,235,153** | ** ** |
| **EQUITY**                                                                                           |       |       |       |                           |       |   |   |
| Issued capital                                                                                       |       | 25         |       | 4,243,244                      |       | 4,332,865 |   |
| Reserves                                                                                             |       | 26         |       | (196,673                       | )          | (177,617 | ) |
| Accumulated losses                                                                                   |       | 27         |       | (2,039,287                     | )          | (1,958,823 | ) |
| Amounts recognised directly in equity in respect of non-current assets   classified as held for sale |       |       |       | (2,148                         | )          | (25,574 | ) |
| **PARENT ENTITY INTEREST**                                                                           |       |       | ** ** | **2,005,136**                  | ** ** | **2,170,851** | ** ** |
| Non-controlling interest                                                                             |       |       |       | 65,144                         |       | 64,302 |   |
| **Total equity**                                                                                     | ** ** | ** ** | ** ** | **2,070,280**                  | ** ** | **2,235,153** | ** ** |

 

Notes to the Consolidated Financial Statements are included on pages 10 to 77.

 

9

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period ended 31 December 2010

 
| **Consolidated**                                                | ** ** | **Issued   capital   $’000** | ** ** | **Hedge   reserve   $’000** | ** ** | **Foreign   currency   translation   reserve   $’000** | ** ** | **Other   reserve   $’000** | ** ** | **General   reserve   $’000** | ** ** | **Accum   losses   $’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 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**          | ** ** |
| Loss for the period                                             |       | —                            |       | —                           |       | —                                                      |       | —                           |       | —                             |       | (80,464                         | )          | **—**                                                                        | ** ** | **(80,464**                                                                       | **)**      | 994                                           | ** ** | **(79,470**            | **)**      |
| Amounts recognised in the current period                        |       | —                            |       | 25,975                           |       | (69,149                                                     | )          | (349                             | )          | —                             |       | —                          |       | 16,444                                                                            | ** ** | **(27,079**                                                                       | **)**      | —                                        | ** ** | **(27,079**            | **)**      |
| Income tax relating to components of other comprehensive income |       | —                            |       | (5,257                           | )          | —                                                      |       | —                           |       | —                             |       | —                          |       | —                                                                            | ** ** | **(5,257**                                                                        | **)**      | —                                        | ** ** | **(5,257**             | **)**      |
| Share of reserves of associates                                 |       | —                            |       | 19,176                           |       | 230                                                         |       | —                           |       | 1,936                              |       | —                          |       | 6,982                                                                             | ** ** | **28,324**                                                                        |       | —                                        | ** ** | **28,324**             | ** ** |
| **Total comprehensive income for the period**                   | ** ** | **—**                        | ** ** | **39,894**                       | ** ** | **(68,919**                                                 | **)**      | **(349**                         | **)**      | **1,936**                          | ** ** | **(80,464**                     | **)**      | **23,426**                                                                        | ** ** | **(84,476**                                                                       | **)**      | **994**                                       | ** ** | **(83,482**            | **)**      |
| Securities issued during the period                             |       | 8,965                             |       | —                           |       | —                                                      |       | —                           |       | —                             |       | —                          | ** ** | **—**                                                                        | ** ** | **8,965**                                                                         |       | —                                        | ** ** | **8,965**              | ** ** |
| Equity component of PINNZ SPARCS                                |       | (1,848                            | )          | —                           |       | —                                                      |       | —                           |       | —                             |       | —                          | ** ** | **—**                                                                        | ** ** | **(1,848**                                                                        | **)**      | —                                        | ** ** | **(1,848**             | **)**      |
| **Total**                                                       | ** ** | **4,339,982**                     | ** ** | **(66,878**                      | **)**      | **(138,149**                                                | **)**      | **25,810**                       | ** ** | **(25,838**                        | **)**      | **(2,039,287**                  | **)**      | **(2,148**                                                                        | **)**      | **2,093,492**                                                                     | ** ** | **65,296**                                    | ** ** | **2,158,788**          | ** ** |
| Minority interests disposed of during the period                |       | —                            |       | —                           |       | —                                                      |       | —                           |       | —                             |       | —                          |       | —                                                                            | ** ** | **—**                                                                        |       | (152                                          | )          | **(152**               | **)**      |
| Amounts recognised in the current period                        |       | —                            |       | —                           |       | —                                                      |       | —                           |       | 8,382                              |       | —                          | ** ** | **—**                                                                        | ** ** | **8,382**                                                                         |       | —                                        | ** ** | **8,382**              | ** ** |
| Distributions paid from capital                                 |       | (96,738                           | )          | —                           |       | —                                                      |       | —                           |       | —                             |       | —                          | ** ** | **—**                                                                        | ** ** | **(96,738**                                                                       | **)**      | —                                        | ** ** | **(96,738**            | **)**      |
| **Total equity at 31 December 2010**                  | ** ** | **4,243,244**                     | ** ** | **(66,878**                      | **)**      | **(138,149**                                                | **)**      | **25,810**                       | ** ** | **(17,456**                        | **)**      | **(2,039,287**                  | **)**      | **(2,148**                                                                        | **)**      | **2,005,136**                                                                     | ** ** | **65,144**                                    | ** ** | **2,070,280**          | ** ** |

 

10

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period ended 31 December 2010

 
| **Consolidated**                                                | ** ** | **Issued   capital   $’000** | ** ** | **Hedge   reserve   $’000** | ** ** | **Foreign   currency   translation   reserve   $’000** | ** ** | **Other   reserve   $’000** | ** ** | **General   reserve   $’000** | ** ** | **Accum   losses   $’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**          | ** ** |

 

Notes to the Consolidated Financial Statements are included on pages 10 to 77.

 

11

----

 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the financial period ended 31 December 2010

 
| ** **                                                                           | ** ** | ** ** | ** ** | **Consolidated**                                      | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------|------------|
| ** **                                                                           | ** ** | **Note**   | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES**                                             |       |       |       |                                                  |       |   |   |
| Receipts from customers                                                              |       |       |       | 381,711                                               |       | 1,085,374 |   |
| Payments to suppliers and employees                                                  |       |       |       | (255,700                                              | )          | (678,648 | ) |
| Interest received                                                                    |       |       |       | 46,529                                                |       | 61,641 |   |
| Interest and other costs of finance paid                                             |       |       |       | (102,175                                              | )          | (448,746 | ) |
| Income tax received/(paid)                                                           |       |       |       | 24,327                                                |       | (13,633 | ) |
| Net stamp duty paid                                                                  |       | 11         |       | —                                                |       | (46,494 | ) |
| **Net cash provided by/(used in) operating activities**                              | ** ** | **37(f**   | **)**      | **94,692**                                            | ** ** | **(40,506** | **)** |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                             |       |       |       |                                                  |       |   |   |
| Payment for property, plant & equipment                                     |       |       |       | (104,856                                              | )          | (214,220 | ) |
| Proceeds from sale of property, plant and equipment                                  |       |       |       | 295                                                   |       | 3,036 |   |
| Net proceeds from deposits                                                           |       |       |       | 33,738                                                |       | 7,629 |   |
| Payment in relation to consortium settlement                                         |       |       |       | (42,279                                               | )          | — |   |
| Proceeds from sale of investments                                                    |       | 37(b       | )          | —                                                |       | 129,371 |   |
| Return on equity from equity accounted investments                                   |       |       |       | —                                                |       | 10,703 |   |
| Payment for investments                                                              |       |       |       | (11,760                                               | )          | (34,415 | ) |
| Proceeds from loans with associates                                                  |       |       |       | 62,328                                                |       | 85,649 |   |
| Repayment of loans to associate entities                                             |       |       |       | (28,701                                               | )          | (39,960 | ) |
| Loan made to associates                                                              |       |       |       | (19,976                                               | )          | — |   |
| Dividends received                                                                   |       |       |       | 2,912                                                 |       | 26,483 |   |
| **Net cash used in investing activities**                                            | ** ** | ** ** | ** ** | **(108,299**                                          | **)**      | **(25,724** | **)** |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                             |       |       |       |                                                  |       |   |   |
| Distributions paid to Stapled Securityholders                                        |       | 28         |       | (95,050                                               | )          | (130,054 | ) |
| Dividends paid to minority interests                                                 |       |       |       | —                                                |       | (4,228 | ) |
| Proceeds from issue of securities                                                    |       | 25         |       | —                                                |       | 1,500,000 |   |
| Security issue costs paid                                                            |       | 25         |       | —                                                |       | (109,207 | ) |
| Proceeds from borrowings                                                             |       |       |       | 20,125                                                |       | 366,032 |   |
| Loan establishment costs paid                                                        |       |       |       | (14,607                                               | )          | (16,537 | ) |
| Repayment of borrowings                                                              |       |       |       | (314,353                                              | )          | (1,352,117 | ) |
| **Net cash (used in)/provided by financing activities**                              | ** ** | ** ** | ** ** | **(403,885**                                          | **)**      | **253,889** | ** ** |
| **NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS**                             |       |       |       | (417,492                                              | )          | 187,659 |   |
| **Cash and cash equivalents at the beginning of the   financial period**             |       |       |       | 526,852                                               |       | 344,034 |   |
| Effects of exchange rate changes on the balance of cash held in foreign   currencies |       |       |       | (2,573                                                | )          | (4,841 | ) |
| **Cash and cash equivalents at the end of the financial   period**(1)                | ** ** | **37(a**   | **)**      | **106,787**                                           | ** ** | **526,852** | ** ** |

 

----

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

 

Notes to the Financial Statements are included on pages 10 to 77.

 

12

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 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   period                                                      |
| 7        |       | Income taxes                                                               |
| 8        |       | Trade and other   receivables                                              |
| 9        |       | Other financial   assets                                                   |
| 10       |       | Inventories                                                                |
| 11       |       | Other assets                                                               |
| 12       |       | Debt service   reserve deposit                                             |
| 13       |       | Investments in   associates                                                |
| 14       |       | Property, plant   and equipment                                            |
| 15       |       | Investment   property                                                      |
| 16       |       | Goodwill                                                                   |
| 17       |       | Other intangible   assets                                                  |
| 18       |       | Trade and other   payables                                                 |
| 19       |       | Borrowings                                                                 |
| 20       |       | Other financial   liabilities                                              |
| 21       |       | Provisions                                                                 |
| 22       |       | Other   liabilities                                                        |
| 23       |       | Retirement   benefit plans                                                 |
| 24       |       | Capitalised   borrowing costs                                              |
| 25       |       | Issued capital                                                             |
| 26       |       | Reserves                                                                   |
| 27       |       | Accumulated   losses                                                       |
| 28       |       | Distributions                                                              |
| 29       |       | Commitments for   expenditure                                              |
| 30       |       | Contingent   assets and liabilities                                        |
| 31       |       | Leases                                                                     |
| 32       |       | Subsidiaries                                                               |
| 33       |       | Discontinued   operations                                                  |
| 34       |       | Key Management   Personnel remuneration                                    |
| 35       |       | Related party   disclosures                                                |
| 36       |       | Subsequent   events                                                        |
| 37       |       | Notes to the   Statement of Cash Flows                                     |
| 38       |       | Financial   instruments                                                    |
| 39       |       | Additional   Company information                                           |

 

13

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**1. SIGNIFICANT ACCOUNTING POLICIES**

 

**STATEMENT OF COMPLIANCE**

 

These Financial Statements are General Purpose Financial Statements which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. and Interpretations.The Financial Statements comprise the consolidated Financial Statements of the Group.

 

The Financial Statements were authorised for issue by the Directors on 18 April 2011.

 

**BASIS OF PREPARATION**

 

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

 

This Financial Report covers the period from 1 July 2010 to 31 December 2010.  The comparative period covers the period from 1 July 2009 to 30 June 2010.   As a result of the successful merge between Prime Infrastructure and Brookfield Infrastructure Partners, which closed on 8 December 2010, Brookfield Infrastructure Partners became the new ultimate parent.   Brookfield Infrastructure Partners has a December year end and accordingly, each of the subsidiaries within the Prime Infrastructure Group has amended their financial year to align with the ultimate parent.

 

**STAPLED SECURITY**

 

The shares of Prime Infrastructure Holdings Limited and the units in Prime Infrastructure Trust and Prime Infrastructure Trust 2 (collectively ‘the Trusts’) are combined and issued as Tripled Stapled Securities in the Prime Infrastructure Group (‘the Group’). The shares in the Company and the units of the Trusts cannot be traded separately and can only be traded as Stapled Securities.

 

Prime Infrastructure Trust 2 joined the Stapled Group as part of the recapitalisation of Prime Infrastructure in November 2009. The equity and reserves of Prime Infrastructure 2 have been included as part of the total equity of the consolidated group rather than being disclosed as a minority interest in order to maintain consistency with the stapling treatment of the Company and the Trust.

 

**GROUP FORMATION AND TERMINATION**

 

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

 

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

 

**CURRENT ASSET DEFICIENCY**

 

The Group has net current liabilities as at 31 December 2010 of $24.8 million excluding assets and liabilities that are classified as held for sale within current assets and current liabilities.  In the financial period ended 31 December 2010, Prime Infrastructure generated $94.7 million in cash flow from operating activities.  In addition, Prime Infrastructure has a $300.0 million corporate debt facility which remains undrawn as at balance date.

 

The Financial Report is prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

 

**(a) Consolidated accounts**

 

As there is no IFRS that specifically applies to stapled securities, management have made reference to the pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices, to the extent that these do not conflict with the requirements of IFRSs and the Framework.

 

Accordingly, management have used the guidance of Australian equivalents to International Financial Reporting Standards Interpretation 1013 ‘Consolidated Financial Reports in relation to Pre-Date-of-Transition Stapling Arrangements’, which requires one of the stapled entities of an existing stapled structure to be identified as the parent entity for the purpose of preparing consolidated financial reports. In accordance with this requirement, Prime Infrastructure Holdings Limited has been identified as the parent entity of the consolidated Group comprising Prime Infrastructure Holdings Limited and its controlled entities, Prime Infrastructure Trust and its controlled entities and Prime Infrastructure Trust 2 and its controlled entities.

 

14

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(b) Principles of consolidation**

 

The consolidated Financial Statements incorporate the assets and liabilities of all subsidiaries of the Prime Infrastructure Group as at 31 December 2010 and the results of all subsidiaries for the period then ended.

 

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

 

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

 

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

 

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

 

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition by acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.

 

**(c) Business combinations**

 

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration of each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

 

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

 

Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date, that is, the date the Group attains control and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

 

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

 

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

 

**(d) Investment in associates**

 

An associate is an entity over which the Group has significant influence that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

15

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

** **

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

 

**(d) Investment in associates (continued)**

 

The results and assets and liabilities of associates are incorporated in these Financial Statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates 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 of the 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 the Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

 

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of the acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the acquisition, after reassessment, is recognised immediately in profit or loss.

 

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

 

**(e) Interests in joint ventures**

 

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

 

Interests in jointly controlled entities in which the Group is a venturer (and so has joint control) are accounted for under the equity method in the consolidated Financial Statements.

 

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

 

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

 

Land and buildings, plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and subsequent accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

 

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight-line basis and diminishing value so as to write-off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciation 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 over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

 

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

 

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 

The following estimated useful lives are used in the calculation of depreciation:

 
| -   Buildings (straight-line) |   | 2 to 50 years  |
|----------------------------------------------|--------|----------------|
| -   Leasehold improvements    |   | 6 to 49 years  |
| -   Plant and equipment       |   | 3 to 39 years  |
| -   Network systems           |   | 20 to 40 years |
| -   Track lease premium       |   | 41 years       |

 

Lease premiums represent the initial amount paid for access to the rail infrastructure assets in Western Australia. These premiums are being amortised over the period of the leases to which they relate, being 41 years.

 

Subsequent acquisitions of leasehold assets are shown as leasehold improvements.

 

16

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(g) Intangible assets**

 

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

 

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

 

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

 

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

 

Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

 

**(h) Impairment of long-lived assets excluding goodwill**

 

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

 

Intangible assets with indefinite useful lives and intangible 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 costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

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

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

**(i) Goodwill**

 

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

 

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

 

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

 

17

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(i) Goodwill (continued)**

 

If the recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period.

 

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

 

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

 

**(j) Cash and cash equivalents**

 

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

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

 

**(k) Inventories**

 

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

 

**(l) Non-current assets held for sale**

 

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

 

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

 

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

 

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

 

The Group has classified its investment in AET&D and Cross Sound Cable as held for sale (refer note 33). A process is currently underway to dispose of these assets.

 

**(m) Financial assets**

 

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

 

Investments are recognised and derecognised on the trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.

 

Financial assets are classified into the following specified 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 assets and is determined at the time of initial recognition.

 

***Effective interest method***

 

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

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

 

18

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(m) Financial assets (continued)**

 

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

 

Financial assets are classified as financial assets at fair value through profit or loss when the financial asset is either held for trading 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 of selling in the near term; or

 

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

 

·             is a derivative that is not designated and effective as a hedging instrument.

 

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

 

***Held to maturity investments***

 

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

 

***Loans and receivables***

 

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

 

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

 

***Impairment of financial assets***

 

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are considered to be impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

 

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying 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 by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

 

***Derecognition of financial assets***

 

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay.

 

**(n) Investment property**

 

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

 

**(o) Leased assets**

 

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

 

***Group as lessee***

 

Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

 

19

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(o) Leased assets (continued)**

 

***Lease incentives***

 

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

 

***Group as lessor***

 

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

 

**(p) Trade and other payables**

 

Trade and other payables are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services.

 

**(q) Borrowings**

 

Borrowings are recorded initially at fair value, net of transaction costs.

 

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

 

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

 

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

 

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

 

**(r) Borrowing costs**

 

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

 

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

 

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

 

**(s) Employee benefits**

 

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

 

Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

 

Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

 

***Defined contribution plans***

 

Contributions to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.

 

***Defined benefit plans***

 

For defined benefit retirement plans, the cost of providing benefits is determined using the ‘Corridor Approach’, with valuations being 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 in which they occur to the extent the movement is outside the corridor.

 

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

 

20

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(s) Employee benefits (continued)**

 

***Defined benefit plans (continued)***

 

The retirement benefit obligation recognised in the Statement of Financial Position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and as reduced by the fair value of the plan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

 

The assets of the relevant schemes are held independently of the Group by trustee companies and are invested by professional fund managers.

 

**(t) Provisions**

 

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

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the obligation, its carrying amount is the present value of those cash flows.

 

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

 

***Onerous contracts***

 

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable cost of meeting the obligations under the contract exceed the economic benefits estimated to be received under it.

 

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

 

Contingent liabilities acquired in a business combination are initially measured at fair value at the date of acquisition. At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation recognised in accordance with IAS 18 Revenue.

 

***Provision for restoration and rehabilitation***

 

A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing the facilities and restoring the affected areas.

 

**(u) Derivative financial instruments**

 

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial instruments are disclosed in note 38.

 

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit and loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

 

The Group designates certain derivatives as either:

 

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

 

·             hedges of highly probable forecast transactions or hedges 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 as a financial asset; a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or non-current liability if the remaining maturity of the instrument is more than 12 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

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(u) Derivative financial instruments (continued)**

 

***Embedded derivatives***

 

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

 

***Hedge accounting***

 

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

 

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

 

Note 38 sets out details of the fair values or the derivative instruments used for hedging purposes.

 

***Fair value hedges***

 

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

 

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

 

***Cash flow hedges***

 

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

 

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are included in the initial measurement of the cost of the non-financial asset or non-financial liability.

 

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

 

**(v) Contributed equity and preference shares**

 

Ordinary Stapled Securities are classified as equity. Mandatorily redeemable preference shares including Prime Infrastructure Networks (NZ) Subordinated Prime Adjusting Reset Convertible Securities (SPARCS) are classified as liabilities (refer note 19).

 

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

 

***Interest and distributions***

 

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

 

**(w) Dividends and distributions**

 

Provision is made for the amount of any dividend or distribution declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial period but not distributed at balance date.  Accrued dividends and distributions are disclosed in note 18.

 

**(x) Foreign currencies**

 

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

 

22

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(x) Foreign currencies (continued)**

 

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

 

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which forms part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve, and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

 

For the purpose of presenting consolidated Financial Statements, the assets and liabilities of the Group’s foreign operations are expressed in Australian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising are classified as recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

 

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

 

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

 

**(y) Revenue recognition**

 

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

 

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

 

**Rendering of services**

 

Revenue from a contract to provide services is recognised as follows:

 

***Distribution and transmission income***

 

Energy distribution and transmission income is recognised when services are provided and are rendered based upon usage or volume throughput during that period. Gas energy distribution income is recognised on an accruals basis.

 

***Freight services revenue***

 

Freight services revenue comprises revenue earned (net of refunds, discounts and allowances) from the provision of services to entities outside the Group. Revenue is recognised at the time services are provided to customers.

 

***Maintenance contracts***

 

Revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses incurred.

 

***Interest revenue***

 

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

 

***Construction contracts***

 

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion.

 

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

 

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

 

23

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

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

 

***Other revenue***

 

Contributions for subdivisions/uneconomic lines (not received in the form of a Government contribution) received towards the costs of reticulating new sub-divisions and contributions received in constructing new lines are recognised as revenue.

 

***Other income***

 

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

 

**(z) Government grants**

 

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

 

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

 

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

 

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

 

**(aa) Income tax**

 

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

 

***Current tax***

 

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

 

***Deferred tax***

 

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

 

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at the end of the each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the tax asset to be recovered.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

 

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

 

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

 

Current and deferred tax is recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside 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 they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination.

 

24

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(ab) Goods and services tax**

 

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

 

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

 

·             for receivables and payables which are recognised inclusive 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 on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

 

**2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS**

 

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

 

No new and revised Standards and Interpretations have been adopted in the current period that have affected the amounts reported in these Financial Statements. Details of other Standards and Interpretations adopted in these Financial Statements but that have had no effect on the amounts reported are set out in note 2(b).

 

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

 

A number of new and revised Standards and Interpretations have also been adopted in these Financial Statements. Their adoption has not had any significant impact on the amounts reported in these Financial Statements but may affect the accounting for future transactions or arrangements.

 

**(c) Standards and Interpretations in issue not yet adopted**

 
| **Standard**                                            | ** ** | **Impact**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ** ** | **Effective for annual   reporting periods   beginning on or after** |
|---------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|
| IFRIC 14   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 not made any early   payment of contributions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       | 1   January 2011                                                                              |
| IFRS 9 Financial   Instruments                          |       | This Standard   introduces new requirements for classifying and measuring financial assets   and liabilities 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.

-               revised requirements for the   classification and measurement of financial liabilities, and carrying over   existing Derecognition requirements from IAS 39 Financial Instruments:   Recognition and Measurement. |       | 1   January 2013                                                                              |

 

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

 

25

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY**

 

In applying the Group’s accounting policies, as described in note 1, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

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

 

Significant judgements, estimates and assumptions made by the Directors in the preparation of these Financial Statements are outlined below:

 

**Impairment of goodwill and intangibles with indefinite lives**

 

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

 

The carrying amount of goodwill and intangibles with indefinite lives at the statement of financial position date was $139.8 million (June 2010: $160.9 million).  No impairment loss was recognised in the current financial period from continuing operations (June 2010: $193.0 million).  Details of the assumptions used in the estimate of recoverable amount are provided in notes 16 and 17.

 

**Intangible assets with finite lives**

 

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

 

The carrying amount of intangible assets with finite lives at the statement of financial position date was $5.1 million (June 2010: $6.6 million).  No impairment loss was recognised in the current financial period from continuing operations (June 2010: $16.0 million).

 

**Classification of assets and liabilities as held for sale**

 

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

 

As part of the recapitalisation of Prime Infrastructure which was completed on 20 November 2009, Prime Infrastructure announced that it would classify its interests in AET&D and Cross Sound Cable as held for sale. Prime Infrastructure has issued an option to the BEPPA holders to receive any proceeds in relation to the disposal of the AET&D assets, whilst a twelve month option (with an option in favour of Brookfield for a further two periods of twelve months each) has been issued to Brookfield to acquire Cross Sound Cable for nominal proceeds.

 

Prime Infrastructure has written down its investment in AET&D to nil value (June 2010: nil).  This resulted in an impairment charge of $40.3 million in the current financial period (June 2010: impairment charge of $662.6 million) being recognised. Further information is disclosed in note 33.

 

**Recovery of deferred tax assets**

 

Deferred tax assets are recognised for deductible temporary differences and carried forward tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences and tax losses.

 

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

 

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

 

26

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**Asset retirement obligations**

 

Provision is made for the anticipated costs of environmental restoration within Tasmania Gas Pipeline and future restoration of the sea bed at Cross Sound Cable (both held for sale). The provision includes future cost estimates associated with the rectification and remediation work. These future costs are discounted to their present value and are disclosed in note 33.

 

**Allowance for impairment loss on trade receivables**

 

Where receivables are outstanding beyond the normal trading terms, the likelihood of recovery of these receivables is assessed by management. Due to the large number of debtors, this assessment is based on supportable past collection history and historical write-offs of bad debts. The impairment loss is disclosed in note 8.

 

**Defined benefit plans**

 

Various actuarial assumptions underpin the determination of the Group’s pension obligations. A number of assumptions including but not limited to wage escalation rates, inflation, interest rates, mortality rates and investment returns are used by the actuaries. Details of the assumptions used by the actuaries are disclosed in note 23.

 

**Discounting of intercompany loans**

 

Prime Infrastructure has a number of loans with associates which are currently non-interest bearing. In determining the present value, a discount rate of between 5.86% and 6.94% has been used for a majority of the intercompany loans.

 

**4. REVENUE**

 

An analysis of the Group’s revenue for the period from continuing operations is as follows:

 
| ** **                                                      | ** ** | **Consolidated**                                      | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                      | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **Continuing operations:**                                      |       |                                                  |       |   |   |
| Revenue from rendering of services                              |       | 175,112                                               |       | 387,598 |   |
| Revenue from rendering of services — related parties       |       | 3,564                                                 |       | 1,335 |   |
| Other revenue                                                   |       | 16,775                                                |       | 6,487 |   |
| **Interest revenue:**                                           |       |                                                  |       |   |   |
| Bank deposits                                                   |       | 7,100                                                 |       | 12,733 |   |
| Other related parties — associates                         |       | 46,478                                                |       | 90,126 |   |
| Other(1)                                                        |       | 4,680                                                 |       | 295 |   |
| Unwinding of unrealised discount on receivables from associates |       | 335                                                   |       | 657 |   |
| ** **                                                      | ** ** | **58,593**                                            | ** ** | **103,811** | ** ** |
| ** **                                                      | ** ** | **254,044**                                           | ** ** | **499,231** | ** ** |

 

----

(1)     Other interest in the current financial period relates to interest received in relation to the Australian Taxation Office (ATO) dispute that was settled.   On 23 August 2010 Prime Infrastructure announced it had settled its dispute with the ATO regarding the deductibility of certain payments relating to Dalrymple Bay Coal Terminal (DBCT).  The settlement relates to payments agreed in 2001 to be made over the term of the initial lease of DBCT (2002 to 2051).  In 2007 Prime Inafrastructure entered into an arrangement with the ATO under which it paid 50% of the disputed amount of primary tax and interest.  These payments totalled $60.6 million.

 

Under the agreed settlement, Prime Infrastructure has:

 

·             received approximately $43.6 million in cash back from the ATO;

 

·             recognised a reduction in deferred tax assets relating to carried forward tax losses of approximately $38.0 million; and

 

·             recognised an immaterial reduction in potential future deductions for the payments to be made over the remaining initial lease term at DBCT.

 

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

 

27

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**5. FINANCE COSTS**

 
| ** **                                                                          | ** ** | **Consolidated**                            | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                          | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **Continuing operations:**                                                          |       |                                        |       |   |   |
| **(a) FINANCE COSTS**                                                               |       |                                        |       |   |   |
| Loss for the year has been arrived at after charging the following   finance costs: |       |                                        |       |   |   |
| Interest on loans                                                                   |       | 43,505                                      |       | 147,629 |   |
| Other interest expense                                                              |       | 2,443                                       |       | 3,310 |   |
| Other finance costs                                                                 |       | 6,949                                       |       | 13,268 |   |
|                                                                                | ** ** | **52,897**                                  | ** ** | **164,207** | ** ** |
| **(b) NET HEDGE GAIN**                                                              |       |                                        |       |   |   |
| Gain on foreign currency derivatives                                                |       | (12,283                                     | )          | (18,462 | ) |
| Loss/(gain) on interest rate derivatives                                            |       | 263                                         |       | (1,188 | ) |
|                                                                                | ** ** | **(12,020**                                 | **)**      | **(19,650** | **)** |

 

28

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**6. LOSS FOR THE PERIOD**

 
| ** **                                                                     | ** ** | **Consolidated**                            | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                     | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **(a) GAINS AND LOSSES**                                                       |       |                                        |       |   |   |
| Loss for the period has been arrived at after crediting the following   gains: |       |                                        |       |   |   |
| **Continuing operations:**                                                     |       |                                        |       |   |   |
| Gain on disposal of property, plant and equipment                              |       | 62                                          |       | 62 |   |
| Contributions from customers/developers                                        |       | 13,527                                      |       | 9,807 |   |
| Government grants                                                              |       | 585                                         |       | 1,169 |   |
| Gain on conversion of BEPPA to Prime Infrastructure Stapled securities(1)      |       | —                                      |       | 392,519 |   |
| Other(2)                                                                       |       | 11,165                                      |       | 1,332 |   |
| ** **                                                                     | ** ** | **25,339**                                  | ** ** | **404,889** | ** ** |
| Loss for the period has been arrived at after charging the following   losses: |       |                                        |       |   |   |
| **Continuing operations:**                                                     |       |                                        |       |   |   |
| Net foreign exchange losses                                                    |       | (95,497                                     | )          | (46,490 | ) |
| Loss on disposal of property, plant and equipment                              |       | (104                                        | )          | (123 | ) |
| ** **                                                                     | ** ** | **(95,601**                                 | **)**      | **(46,613** | **)** |
| **(b) OTHER EXPENSES**                                                         |       |                                        |       |   |   |
| **Continuing operations:**                                                     |       |                                        |       |   |   |
| Net bad and doubtful debts arising from other entities                         | ** ** | **32**                                      | ** ** | **647** | ** ** |
|                                                                           |       |                                        |       |   |   |
| Depreciation of non-current assets (note 14)                                   |       | 43,146                                      |       | 75,915 |   |
| Amortisation of non-current assets (note 17)                                   |       | 1,463                                       |       | 1,222 |   |
| Impairment of non-current assets                                               |       | —                                      |       | 51,681 |   |
| ** **                                                                     | ** ** | **44,609**                                  | ** ** | **128,818** | ** ** |
| ** **                                                                     | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| Impairment of intercompany loans with associates                               | ** ** | **21,507**                                  | ** ** | **95,658** | ** ** |
|                                                                           |       |                                        |       |   |   |
| **Operating lease rental expense:**                                            |       |                                        |       |   |   |
| Minimum lease payments                                                         | ** ** | **989**                                     | ** ** | **1,394** | ** ** |

 

----

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

(2)          Other includes the settlement of a legal claim resulting in a gain of $2.1 million and a non-cash gain of $9.0 million on the settlement of payables with consortium members in relation to the Alinta transaction.

 

29

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**7. INCOME TAXES**

 
| ** **                                                                                     | ** ** | **Consolidated**                            | ** ** |
|------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                     | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **(a) INCOME TAX RECOGNISED IN PROFIT OR LOSS**                                                |       |                                        |       |   |   |
| **Tax (benefit)/expense comprises:**                                                           |       |                                        |       |   |   |
| Current tax benefit                                                                            |       | (12,432                                     | )          | (77,430 | ) |
| Adjustments recognised in the current period in relation to the current   tax of prior periods |       | (1,911                                      | )          | 44,777 |   |
| Deferred tax expense relating to the origination and reversal of   temporary differences       |       | 12,241                                      |       | 50,532 |   |
| Adjustments to deferred tax benefit of prior periods                                           |       | (2,783                                      | )          | (11,492 | ) |
| **Total tax (benefit)/expense**                                                                | ** ** | **(4,885**                                  | **)**      | **6,387** | ** ** |
| **Attributable to:**                                                                           |       |                                        |       |   |   |
| Continuing operations                                                                          |       | (12,210                                     | )          | 941 |   |
| Discontinued operations (note 33)                                                              |       | 7,325                                       |       | 5,446 |   |
| ** **                                                                                     | ** ** | **(4,885**                                  | **)**      | **6,387** | ** ** |
| **Income tax on pre-tax accounting profit reconciles to   tax (benefit)/expense as follows:**  |       |                                        |       |   |   |
| (Loss)/profit from continuing operations                                                       |       | (85,373                                     | )          | 33,236 |   |
| Profit/(loss) from discontinued operations (note 33)                                           |       | 1,018                                       |       | (975,447 | ) |
|                                                                                           | ** ** | **(84,355**                                 | **)**      | **(942,211** | **)** |
| Income tax benefit calculated at 30%                                                           |       | (25,307                                     | )          | (282,663 | ) |
| Income not assessable (including trust income)                                                 |       | 27,362                                      |       | (10,199 | ) |
| Differences in overseas tax rates                                                              |       | (591                                        | )          | (19,808 | ) |
| Deferred tax assets not recognised                                                             |       | (3,094                                      | )          | 35,810 |   |
| Non-deductible expenditure                                                                     |       | —                                      |       | 5,678 |   |
| Impairment loss                                                                                |       | 6,452                                       |       | 206,377 |   |
| Unwinding of unrealised discount on related party receivables/payables                         |       | —                                      |       | (1,227 | ) |
| Equity accounted results                                                                       |       | 927                                         |       | 62,219 |   |
| Other permanent differences                                                                    |       | (5,941                                      | )          | (22,995 | ) |
| ** **                                                                                     | ** ** | **(192**                                    | **)**      | **(26,808** | **)** |
| (Over)/under provision of income tax in previous period                                        |       | (4,693                                      | )          | 33,195 |   |
| **Income tax (benefit)/expense recognised in profit or   loss**                                | ** ** | **(4,885**                                  | **)**      | **6,387** | ** ** |

 

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

 

30

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**7. INCOME TAXES (CONTINUED)**

 
| ** **                                                                                           | ** ** | **Consolidated**          | ** ** |
|------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                                           | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’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                                     |       | (5,257                    | )          | 11,479 |   |
| Translation of foreign operations                                                                    |       | (10,531                   | )          | (28,582 | ) |
| Other reserve                                                                                        |       | —                    |       | (2,325 | ) |
| **Total income tax recognised directly in other   comprehensive income**                             | ** ** | **(15,788**               | **)**      | **(19,428** | **)** |
| **(c) CURRENT TAX ASSETS AND LIABILITIES**                                                           |       |                      |       |   |   |
| **Current tax assets:**                                                                              |       |                      |       |   |   |
| **Tax refund receivable**                                                                            | ** ** | **10**                    | ** ** | **10** | ** ** |
| **Current tax payable:**                                                                             |       |                      |       |   |   |
| **Income tax payable attributable to:**                                                              |       |                      |       |   |   |
| Parent entity                                                                                        |       | —                    |       | — |   |
| Entities in the consolidated group                                                                   |       | (2,020                    | )          | (847 | ) |
| ** **                                                                                           | ** ** | **(2,020**                | **)**      | **(847** | **)** |
| ** **                                                                                           | ** ** | **(2,010**                | **)**      | **(837** | **)** |
|                                                                                                 |       |                      |       |   |   |
| **(d) DEFERRED TAX ASSETS**                                                                          |       |                      |       |   |   |
|                                                                                                 |       |                      |       |   |   |
| **Total deferred tax assets attributable to temporary   differences**                                | ** ** | **147,069**               | ** ** | **166,977** | ** ** |
|                                                                                                 |       |                      |       |   |   |
| **Deferred tax assets attributable to tax losses carried   forward in the following jurisdictions:** |       |                      |       |   |   |
| Australia                                                                                            |       | 100,986                   |       | 78,301 |   |
| United Kingdom                                                                                       |       | 1,113                     |       | 1,230 |   |
| **Total deferred tax assets attributable to tax losses**                                             | ** ** | **102,099**               | ** ** | **79,531** | ** ** |
| **Total deferred tax assets attributable to withholding   tax**                                      | ** ** | **1,680**                 | ** ** | **2,570** | ** ** |
| **Total deferred tax assets**                                                                        | ** ** | **250,848**               | ** ** | **249,078** | ** ** |

 

31

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**7. INCOME TAXES (CONTINUED)**

 
| ** **                                                                                                                       | ** ** | **Consolidated**          | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                                                                       | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **(d) DEFERRED TAX ASSETS (CONTINUED)**                                                                                          |       |                      |       |   |   |
| **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                                                                                           |       | 166,977                   |       | 611,002 |   |
| Amounts booked to foreign currency translation reserve                                                                           |       | (10,531                   | )          | — |   |
| Revaluation of hedges                                                                                                            |       | (5,257                    | )          | 273 |   |
| Equity raising costs and other                                                                                                   |       | 1,937                     |       | 2,389 |   |
| Acquisitions/disposals                                                                                                           |       | 87                        |       | (327,055 | ) |
| Less closing balance of deferred tax assets attributable to temporary   differences                                              |       | (147,069                  | )          | (166,977 | ) |
| **Change in deferred tax assets included in tax benefit**                                                                        | ** ** | **6,144**                 | ** ** | **(119,632** | **)** |
| **(e) DEFERRED TAX LIABILITIES**                                                                                                 |       |                      |       |   |   |
| **Total deferred tax liabilities attributable to temporary   differences**                                                       | ** ** | **57,880**                | ** ** | **61,173** | ** ** |
| **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                                                                                      |       | 61,173                    |       | 945,399 |   |
| Amounts booked to foreign currency translation reserve                                                                           |       | —                    |       | (28,582 | ) |
| Acquisitions/disposals                                                                                                           |       | 21                        |       | (786,580 | ) |
| Revaluation of hedges                                                                                                            |       | —                    |       | 11,617 |   |
| Less closing balance of deferred tax liabilities                                                                                 |       | (57,880                   | )          | (61,173 | ) |
| **Change in deferred tax liabilities included in tax   benefit/(expense)**                                                       | ** ** | **3,314**                 | ** ** | **(80,681** | **)** |

 

**RELEVANCE OF TAX CONSOLIDATION TO THE GROUP**

 

The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2002 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Prime Infrastructure Holdings Limited. The members of the tax consolidated group are identified at note 32.

 

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

 

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

 

Tax expense/benefit, deferred tax assets and deferred tax liabilities for temporary differences for members of the tax consolidated group are reflected differently depending on whether the member is a controlled subsidiary, an associate or part of a disposal group classified as held for sale.

 

32

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**7. INCOME TAXES (CONTINUED)**

 

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

 

Entities within the tax-consolidated groups have entered into a tax funding arrangement and a tax sharing agreement with the relevant head entity. Under the terms of the tax funding arrangement, Prime Infrastructure Holdings Limited and each of the relevant entities in its tax-consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group. Similar arrangements exist between head entities and member entities of the other two tax-consolidated groups.

 

**8. TRADE AND OTHER RECEIVABLES**

 
| ** **                                    | ** ** | **Consolidated**          | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **CURRENT**                                   |       |                      |       |   |   |
| Trade receivables(1)                          |       | 38,147                    |       | 43,479 |   |
| Impairment provision                          |       | (1,198                    | )          | (1,344 | ) |
| ** **                                    | ** ** | **36,949**                | ** ** | **42,135** | ** ** |
| GST and VAT receivables                       |       | 808                       |       | 1,765 |   |
|                                          |       |                      |       |   |   |
| Interest receivable from associates           |       | 9,070                     |       | 26,015 |   |
| Interest receivable – other entities     |       | 119                       |       | 1,479 |   |
| ** **                                    | ** ** | **9,189**                 | ** ** | **27,494** | ** ** |
| Insurance claim receivable                    |       | —                    |       | 2,097 |   |
| Other                                         |       | 7,766                     |       | 8,639 |   |
| **NON-CURRENT**                               |       |                      |       |   |   |
| Trade receivables                             |       | 3,150                     |       | 3,728 |   |
| Other receivables                             |       | 867                       |       | 1,189 |   |
| ** **                                    | ** ** | **58,729**                | ** ** | **87,047** | ** ** |
| **Disclosed in the Financial Statements as:** |       |                      |       |   |   |
| Current trade and other receivables           |       | 54,712                    |       | 82,130 |   |
| Non-current trade and other receivables       |       | 4,017                     |       | 4,917 |   |
| ** **                                    | ** ** | **58,729**                | ** ** | **87,047** | ** ** |

 

----

(1)          The average credit period on sales of services is 30 to 45 days. No interest is charged on trade receivables. An allowance has been made for estimated irrecoverable amounts from the provision of services, determined by reference to past default experience.

 

Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period but against which the Group has not recognised an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered to be fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.

 

33

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**8. TRADE AND OTHER RECEIVABLES (CONTINUED)**

 
| ** **                                        | ** ** | **Consolidated**          | ** ** |
|---------------------------------------------------|------------|---------------------------|------------|
| ** **                                        | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Ageing of past due but not impaired:**          |       |                      |       |   |   |
| Not past due                                      |       | 28,762                    |       | 37,814 |   |
| Past due - 0 to 30 days                           |       | 8,234                     |       | 4,331 |   |
| Past due - 30 to 60 days                          |       | 858                       |       | 1,503 |   |
| Past due – 60 to 90 days                     |       | 550                       |       | 1,036 |   |
| Past due – 90 to 120 days                    |       | 393                       |       | 859 |   |
| Past due – 120 plus days                     |       | 1,302                     |       | 320 |   |
| ** **                                        | ** ** | **40,099**                | ** ** | **45,863** | ** ** |
| **Movement in the allowance for doubtful debts:** |       |                      |       |   |   |
| Balance at the beginning of the period            |       | (1,344                    | )          | (2,989 | ) |
| Impairment losses recognised on receivables       |       | (172                      | )          | (767 | ) |
| Amounts written off as uncollectible              |       | 23                        |       | (115 | ) |
| Amounts recovered during the year                 |       | 15                        |       | 156 |   |
| Impairment losses reversed                        |       | 125                       |       | 60 |   |
| Net difference due to foreign exchange            |       | 155                       |       | 580 |   |
| Derecognised on disposal of subsidiary            |       | —                    |       | 1,661 |   |
| Transferred to held for sale                      |       | —                    |       | 70 |   |
| ** **                                        | ** ** | **(1,198**                | **)**      | **(1,344** | **)** |

 

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

 
| ** **                                | ** ** | **Consolidated**          | ** ** |
|-------------------------------------------|------------|---------------------------|------------|
| ** **                                | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Ageing of impaired trade receivables:** |       |                      |       |   |   |
| Not past due                              |       | —                    |       | — |   |
| Past due - 0 to 30 days                   |       | —                    |       | — |   |
| Past due - 30 to 60 days                  |       | —                    |       | — |   |
| Past due – 60 to 90 days             |       | —                    |       | — |   |
| Past due – 90 to 120 days            |       | (60                       | )          | (853 | ) |
| Past due – 120 plus days             |       | (1,138                    | )          | (491 | ) |
| ** **                                | ** ** | **(1,198**                | **)**      | **(1,344** | **)** |

 

34

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**9. OTHER FINANCIAL ASSETS**

 
| ** **                                         | ** ** | **Consolidated**          | ** ** |
|----------------------------------------------------|------------|---------------------------|------------|
| ** **                                         | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **DERIVATIVES**                                    |       |                      |       |   |   |
| **Current:**                                       |       |                      |       |   |   |
| Foreign currency swaps                             |       | 23                        |       | 4,171 |   |
| ** **                                         |       |                      |       |   |   |
| **Non-current:**                                   |       |                      |       |   |   |
| Foreign currency swaps                             |       | —                    |       | 2,623 |   |
| Interest rate swaps                                |       | 3,414                     |       | — |   |
| ** **                                         | ** ** | **3,437**                 | ** ** | **6,794** | ** ** |
| **LOANS CARRIED AT AMORTISED COST**                |       |                      |       |   |   |
| **Current:**                                       |       |                      |       |   |   |
| Non-interest bearing loan with associate(1)        | ** ** | **34,829**                | ** ** | **34,829** | ** ** |
| ** **                                         |       |                      |       |   |   |
| **Non-current:**                                   |       |                      |       |   |   |
| Interest bearing loans with associate(2)           |       | 786,771                   |       | 919,300 |   |
| Provision for impairment of loans with associates  |       | (53,401                   | )          | (31,229 | ) |
| ** **                                         | ** ** | **733,370**               | ** ** | **888,071** | ** ** |
| Non-interest bearing loan with associate(3)        |       | 20,006                    |       | 11,771 |   |
|                                               |       |                      |       |   |   |
| Provision for impairment of loan with   associates |       | —                    |       | (3,924 | ) |
|                                               | ** ** | **20,006**                | ** ** | **7,847** | ** ** |
|                                               | ** ** | **788,205**               | ** ** | **930,747** | ** ** |
| **OTHER FINANCIAL ASSETS**                         |       |                      |       |   |   |
| **Current:**                                       |       |                      |       |   |   |
| Deposit – Australian Taxation Office(4)       | ** ** | **—**                | ** ** | **28,030** | ** ** |
|                                               |       |                      |       |   |   |
| **Disclosed in the Financial Statements as:**      |       |                      |       |   |   |
| Other current financial assets                     |       | 34,852                    |       | 67,030 |   |
| Other non-current financial assets                 |       | 756,790                   |       | 898,541 |   |
| ** **                                         | ** ** | **791,642**               | ** ** | **965,571** | ** ** |

 

----

(1)          Current non-interest bearing loans with associates relate to loans with DBCT ($34.8 million). Refer note 35 for further information in relation to loans with related parties.

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

 

·       $432.3 million (US $440.0 million) loan receivable from Myria Holdings Inc. in which Prime Infrastructure has a 33% equity interest.  Subsequent to period end, these loan notes were transferred to BIP Bermuda Holdings IV Limited for US$451.6 million including accrued interest.  Refer to note 36 for further information.

·       $197.9 million (NZ $260.5 million) loan receivable from Powerco New Zealand in which Prime Infrastructure has a 42% equity interest.

·       $67.4 million loan receivable from DBCT in which Prime Infrastructure has a 50.1% economic interest.

·       $89.2 million (€67.9 million) loan receivable which has been impaired by $53.4 million (€41.6 million) from Euroports Holdings S.á.r.l in which Prime Infrastructure has a 60% equity interest. Refer note 35 for further information in relation to loans with related parties.

 

35

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**9. OTHER FINANCIAL ASSETS (CONTINUED)**

 

(3)          Non-current non-interest bearing loans with associates include the following:

 

·       loans receivable from Euroports Holdings S.á.r.l. totaling $176.6 million (€134.4 million) which have a carrying value of $11.1 million (€8.5 million). Refer note 35 for further information in relation to loans with related parties.

·       Loan receivable from the equity accounted investments Long Bay Public Private Partnership and Melbourne Showgrounds Public Private Partnership of $8.9 million.

 

(4)          Cash on deposit with the Australian Taxation Office related to a dispute regarding the deductibility of certain payments made in relation to the long-term lease of DBCT. This dispute was settled in the current financial period.   Refer to note 4 for further information.

 

**10. INVENTORIES**

 
| ** **   | ** ** | **Consolidated**          | ** ** |
|--------------|------------|---------------------------|------------|
| ** **   | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Current:** |       |                      |       |   |   |
| Consumables  | ** ** | **13,156**                | ** ** | **14,713** | ** ** |

 

**11. OTHER ASSETS**

 
| ** **                                    | ** ** | **Consolidated**          | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Current:**                                  |       |                      |       |   |   |
| Deposits                                      |       | 107                       |       | 169 |   |
| Prepayments                                   |       | 13,082                    |       | 8,109 |   |
| Other                                         |       | 19                        |       | 22 |   |
| ** **                                    | ** ** | **13,208**                | ** ** | **8,300** | ** ** |
| **Non-current:**                              |       |                      |       | — |   |
| Stamp duty costs paid(1)                      |       | 71,346                    |       | 71,346 |   |
| Defined benefit asset                         |       | 4,728                     |       | 5,542 |   |
| Other                                         |       | 210                       |       | 256 |   |
| ** **                                    | ** ** | **76,284**                | ** ** | **77,144** | ** ** |
| **Disclosed in the Financial Statements as:** |       |                      |       |   |   |
| Other current assets                          |       | 13,208                    |       | 8,300 |   |
| Other non-current assets                      |       | 76,284                    |       | 77,144 |   |
| ** **                                    | ** ** | **89,492**                | ** ** | **85,444** | ** ** |

 

----

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

 

WestNet WA Rail Pty Limited, the immediate parent of WestNet Rail Holdings No.1 Pty Limited, and also wholly-owned by the Company, exercised its contractual rights of indemnity against Queensland Rail as acquirer 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 liability of WestNet Rail Holdings No.1 Pty Limited under the assessment. Refer to note 22 for liability owing to Queensland Rail.  Accordingly, if it is ultimately determined that WestNet Rail Holdings No.1 Pty Limited is liable for stamp duty, the net duty required to be funded by the Company would be $46.4 million. This amount has been included as a contingent liability (refer note 30).

 

36

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**12. DEBT SERVICE RESERVE DEPOSIT**

 
| ** **                      | ** ** | **Consolidated**          | ** ** |
|---------------------------------|------------|---------------------------|------------|
| ** **                      | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Non-current:**                |       |                      |       |   |   |
| Debt service reserve deposit(1) | ** ** | **26,361**                | ** ** | **29,853** | ** ** |

 

----

(1)   Debt Service Reserve deposit at bank is interest-bearing and comprises cash restricted as a reserve for the servicing of debt under the Group’s financing agreements, capex reserves and cash relating to cash backed bank guarantees.

 

**13. INVESTMENTS IN ASSOCIATES**

 
| ** **                                                                             | ** ** | **Consolidated**          | ** ** |
|----------------------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                             | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Non-current:**                                                                       |       |                      |       |   |   |
| Investments in associates                                                              |       | 402,655                   |       | 397,602 |   |
| Investments in joint venture entities                                                  |       | 357                       |       | 386 |   |
| ** **                                                                             | ** ** | **403,012**               | ** ** | **397,988** | ** ** |
| **Reconciliation of movement in investments accounted for   using the equity method:** |       |                      |       |   |   |
| Balance at 1 July                                                                      |       | 397,988                   |       | 650,509 |   |
| Share of (loss)/profit for the period – continuing operations(5)                  |       | (13,329                   | )          | (185,055 | ) |
| Share of profit for the period – discontinued operations (note 33)                |       | 10,878                    |       | 10,388 |   |
| Share of reserves for the period                                                       |       | 28,324                    |       | (61,242 | ) |
| ** **                                                                             | ** ** | **423,861**               | ** ** | **414,600** | ** ** |
| Dividends                                                                              |       | (2,912                    | )          | (26,483 | ) |
| Additions(1)                                                                           |       | 44,971                    |       | 330,064 |   |
| Capital returns on equity investments(2)                                               |       | —                    |       | (10,703 | ) |
| Impairment(3)                                                                          |       | —                    |       | (74,763 | ) |
| Transferred to held for sale (note 33)(4)                                              |       | (19,527                   | )          | (260,000 | ) |
| Net foreign exchange differences                                                       |       | (43,381                   | )          | 25,273 |   |
| ** **                                                                             | ** ** | **403,012**               | ** ** | **397,988** | ** ** |

 

----

(1)   The additions in the current financial period relate to the acquisition of a 50% equity interest in the Long Bay Public Private Partnership and 50% in the Melbourne Showgrounds Public Private Partnership ($13.0 million).  These were acquired from BIP Bermuda Holdings IV Limited, the immediate parent entity of Prime Infrastructure.  The balance of the additions relate to the capitalisation of accrued interest with Myria Holdings Inc ($20.2 million), equity contribution to Euroports ($8.1 million) and equity contributions by AET&D ($3.6 million) to its associate investments.   The prior year additions relate to the acquisition of DBCT and Euroports.  In the prior year, the results from these assets were consolidated as they were controlled subsidiaries of Prime Infrastructure.

(2)   Capital returns on equity investments in the prior year relate to Myria Holdings Inc.

(3)   In the prior financial year, the impairment charge of $74.8 million within equity accounted investments related to a write down in the Multinet Gas Holdings and Dampier to Bunbury Natural Gas Pipeline of $23.1 million, a write down in the investment in Myria Holdings Inc. of $36.2 million and a write down in the investment in Euroports of $15.5 million.

(4)   Prime Infrastructure has classified its investment in AET&D as held for sale as at 31 December 2010 and 30 June 2010. Included within the portfolio of assets within AET&D is the equity accounted investments in Multinet Gas Holdings and Dampier to Bunbury Natural Gas Pipeline. Accordingly, these investments are no longer included within investments in associates, but rather as a current asset within non-current assets classified as held for sale.

(5)   In the prior year, included within share of (loss)/profit for the period – continuing operations, is the settlement of the DBCT ATO dispute, accounted for as an adjusting subsequent event.  Also included within the share of (loss)/profit for the year – continuing operations in the prior year is an impairment charge of $75.8 million in relation to Myria Holdings Inc’s underlying investment in Natural Gas Pipeline of America.

 

37

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 
| **Name   of entity**                                          | ** ** | **Principal activity**                    | ** ** | **Country of   incorporation** | ** ** | **Economic   interest   Dec 2010   %** | ** ** | **Economic   interest   June 2010   %** | ** ** |
|---------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|
| Dalrymple Bay Coal Terminal(1)                                |       | Coal terminal                             |       | Australia                      |       | 50.1                                   |       | 50.1                                    |       |
| Powerco New Zealand Holdings Limited(5)                       |       | 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                     |       | 60                                     |       | 66.1                                    |       |
| Multinet Gas Holdings(3), (6)                            |       | Gas distribution                          |       | Australia                      |       | 20.1                                   |       | 20.1                                    |       |
| Dampier to Bunbury Natural Gas Pipeline(3), (6)          |       | Gas transmission                          |       | Australia                      |       | 20                                     |       | 20                                      |       |
| Myria Holdings Inc.(7)                                        |       | Natural gas   transmission and storage    |       | USA                            |       | 33                                     |       | 33                                      |       |
| Brookfield Infrastructure Long Bay Holdings Pty Limited(4)    |       | Investment in   the Long Bay Jail         |       | Australia                      |       | 50                                     |       | —                                  |       |
| Brookfield Infrastructure Showgrounds Holdings Pty Limited(4) |       | Investment in   the Melbourne Showgrounds |       | Australia                      |       | 50                                     |       | —                                  |       |

 

----

(1)   As part of the recapitalisation completed on 20 November 2009, Brookfield Infrastructure Australia Trust agreed to subscribe for Convertible Notes for $295.4 million and enter into a number of other agreements with Prime Infrastructure which confer on Brookfield Infrastructure Australia Trust a 49.9% economic interest in DBCT.  As a result of this transaction, Prime Infrastructure no longer controls DBCT in accordance with Accounting Standards and equity accounts its investment.

(2)   The sale of 33.89% of Euroports was completed on 28 July 2009.  During the current period, Antin IP converted its convertible bond which decreased Prime Infrastructure’s investment in Euroports to 60%.   Prime Infrastructure does not control Euroports in accordance with Accounting Standards as a result of the voting rights held by other shareholders

(3)   These investments are part of the AET&D group of assets.  As at 31 December 2010 and 30 June 2010, these investments have been classified as held for sale.

(4)   In the current financial period, Prime Infrastructure acquired the 50% equity interest investment in the Long Bay Public Private Partnership and 50% in the Melbourne Showgrounds Public Private Partnership.  These investments were acquired from BIP Bermuda Holdings IV Limited, the immediate parent entity of Prime Infrastructure.

(5)   The financial year end date of Powerco New Zealand Holdings Limited is 30 June.  This was the reporting date established when the company was incorporated.  As Prime Infrastructure has a minority ownership, a change of reporting date is not possible.  The interim results for the half year ended 31 December 2010 of Powerco New Zealand Limited have therefore been used for the purpose of accounting for the investment in associate.

(6)   The financial year end date of Dampier to Bunbury Natural Gas Pipeline and Multinet Gas Holdings is 30 June.  This was the reporting date established when the company was incorporated.  As Prime Infrastructure has a minority ownership, a change of reporting date is not possible.  The interim results for the half year ended 31 December 2010 of these entities have therefore been used for the purpose of accounting for the investment in associate.

(7)   The financial year end date of Myria Holdings Inc. and its subsidiary, Natural Gas Pipeline of America is 30 June.  This was the reporting date established when the company was incorporated.  As Prime Infrastructure has a minority ownership, a change of reporting date is not possible.  The interim results for the half year ended 31 December 2010 of these entities have therefore been used for the purpose of accounting for the investment in associate.

 

38

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 
| ** **                                                                  | ** ** | **Consolidated**          | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **SUMMARISED FINANCIAL INFORMATION OF ASSOCIATE ENTITIES**                  |       |                      |       |   |   |
| **Financial position:**                                                     |       |                      |       |   |   |
| Total assets                                                                |       | 14,541,298                |       | 16,356,921 |   |
| Total liabilities                                                           |       | (13,543,332               | )          | (15,331,876 | ) |
| **Net assets**                                                              | ** ** | **997,966**               | ** ** | **1,025,045** | ** ** |
| **Group’s share of associates’ net assets**                       | ** ** | **402,655**               | ** ** | **397,602** | ** ** |
| **Financial performance:**                                                  |       |                      |       |   |   |
| Total revenue                                                               |       | 1,390,796                 |       | 3,019,935 |   |
| Total (loss)/profit for the period                                          |       | (15,242                   | )          | (388,564 | ) |
| **Group’s share of associates’ loss**                             | ** ** | **(2,421**                | **)**      | **(174,741** | **)** |
| **SUMMARISED FINANCIAL INFORMATION OF JOINTLY CONTROLLED   ENTITIES**       |       |                      |       |   |   |
| **Financial position:**                                                     |       |                      |       |   |   |
| Current assets                                                              |       | 4,045                     |       | 3,998 |   |
| Non-current assets                                                          |       | 54                        |       | 53 |   |
| ** **                                                                  | ** ** | **4,099**                 | ** ** | **4,051** | ** ** |
| Current liabilities                                                         |       | (3,385                    | )          | (3,279 | ) |
| Non-current liabilities                                                     |       | —                    |       | — |   |
| ** **                                                                  | ** ** | **(3,385**                | **)**      | **(3,279** | **)** |
| **Net assets**                                                              | ** ** | **714**                   | ** ** | **772** | ** ** |
| **Group’s share of jointly controlled entities’ net assets**      | ** ** | **357**                   | ** ** | **386** | ** ** |
| **Financial performance:**                                                  |       |                      |       |   |   |
| Income                                                                      |       | 98                        |       | 173 |   |
| Expenses                                                                    |       | (158                      | )          | (25 | ) |
| **Net (loss)/profit**                                                       | ** ** | **(60**                   | **)**      | **148** | ** ** |
| **Group’s share of jointly controlled entities’   (loss)/profit** | ** ** | **(30**                   | **)**      | **74** | ** ** |

 

**Dividends received from associates and joint ventures**

 

During the year, the Group received dividends of $2.9 million (June 2010: $26.5 million).

 

**Contingent liabilities and capital commitments**

 

The Group’s share of contingent liabilities of associates and jointly controlled entities is disclosed in note 30.

 

The Group’s share of capital commitments and other expenditure commitments of associates and jointly controlled entities is disclosed in note 29.

 

39

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**14. 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 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                | )          |
| Disposals   through sale of business        |       | (247,077                                                  | )          | (16,989                                                  | )          | —                                            |       | —                                                     |       | (81,453                                                    | )          | (42,606                                                 | )          | (388,125               | )          |
| Classified as   held for sale (note 33)     |       | (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**          | ** ** |
| Additions                                   |       | 25                                                        |       | 12,930                                                   |       | 25,500                                            |       | —                                                     |       | 5,326                                                      |       | 49,997                                                  |       | 93,778                 |       |
| Transfers                                   |       | (41                                                       | )          | 15,246                                                   |       | 3,689                                             |       | (15,425                                                    | )          | 220                                                        |       | (3,689                                                  | )          | —                 |       |
| Disposals                                   |       | (6                                                        | )          | (434                                                     | )          | (22                                               | )          | —                                                     |       | (1,606                                                     | )          | —                                                  |       | (2,068                 | )          |
| Net foreign   currency exchange differences |       | (6,046                                                    | )          | —                                                   |       | (68,202                                           | )          | —                                                     |       | (4,862                                                     | )          | 14                                                      |       | (79,096                | )          |
| **Balance   at 31 December 2010** | ** ** | **37,828**                                                | ** ** | **1,047,647**                                            | ** ** | **654,708**                                       | ** ** | **182,930**                                                | ** ** | **56,296**                                                 | ** ** | **59,743**                                              | ** ** | **2,039,152**          | ** ** |

 

40

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**14. 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 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 33)          |       | (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**            | ** ** |
| Disposals                                        |       | —                                                    |       | (29                                                      | )          | (5                                                | )          | —                                                     |       | (1,280                                                     | )          | —                                                  |       | (1,314                 | )          |
| Depreciation   expense                           |       | 165                                                       |       | 26,009                                                   |       | 9,870                                             |       | 2,102                                                      |       | 5,000                                                      |       | —                                                  |       | 43,146                 |       |
| Net foreign   currency exchange differences      |       | (284                                                      | )          | —                                                   |       | (8,669                                            | )          | —                                                     |       | (1,729                                                     | )          | —                                                  |       | (10,682                | )          |
| **Balance   at 31 December 2010**      | ** ** | **1,910**                                                 | ** ** | **166,627**                                              | ** ** | **113,189**                                       | ** ** | **20,360**                                                 | ** ** | **20,885**                                                 |       | —                                                  | ** ** | **(322,971**           | **)**      |
| **Net   Book Value as at 30 June 2010**     | ** ** | **41,867**                                                | ** ** | **879,258**                                              | ** ** | **581,750**                                       | ** ** | **180,097**                                                | ** ** | **38,324**                                                 | ** ** | **13,421**                                              | ** ** | **1,734,717**          | ** ** |
| **Net   Book Value as at 31 December 2010** | ** ** | **35,918**                                                | ** ** | **881,020**                                              | ** ** | **541,519**                                       | ** ** | **162,570**                                                | ** ** | **35,411**                                                 | ** ** | **59,743**                                              | ** ** | **1,716,181**          | ** ** |

 

41

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 
| ** **                                                                                                                                                  | ** ** | **Consolidated**                            | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                                                                                                  | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010******** (12 months)   $’000** | ** ** |
| **Aggregate depreciation allocated, whether recognised as   an expense or capitalised as part of the carrying amount of other assets   during the period:** |       |                                        |       |   |   |
| Land and buildings                                                                                                                                          |       | 165                                         |       | 3,185 |   |
| Leasehold improvements                                                                                                                                      |       | 26,009                                      |       | 42,484 |   |
| Network systems                                                                                                                                             |       | 9,870                                       |       | 20,497 |   |
| Track lease premium                                                                                                                                         |       | 2,102                                       |       | 4,472 |   |
| Plant and equipment                                                                                                                                         |       | 5,000                                       |       | 29,345 |   |
| ** **                                                                                                                                                  | ** ** | **43,146**                                  | ** ** | **99,983** | ** ** |

 

**15. INVESTMENT PROPERTY**

 
| ** **                               | ** ** | **Consolidated**          | ** ** |
|------------------------------------------|------------|---------------------------|------------|
| ** **                               | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Balance at beginning of financial period |       | —                    |       | 174,672 |   |
| Disposals                                |       | —                    |       | (154,027 | ) |
| Net foreign exchange differences         |       | —                    |       | (20,645 | ) |
| **Balance at end of financial period**   | ** ** | **—**                | ** ** | **—** | ** ** |

 

The Group’s investment property portfolio was held by PD Ports, which was sold on 20 November 2009.

 

42

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**16. GOODWILL**

 
| ** **                                   | ** ** | **Consolidated**          | ** ** |
|----------------------------------------------|------------|---------------------------|------------|
| ** **                                   | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Gross carrying amount:**                   |       |                      |       |   |   |
| Balance at beginning of financial period     |       | 216,678                   |       | 726,979 |   |
| Derecognised on disposal of subsidiary(1)    |       | —                    |       | (148,049 | ) |
| Transferred to held for sale (note 33)(2)    |       | —                    |       | (318,630 | ) |
| Net foreign exchange differences             |       | (21,126                   | )          | (43,622 | ) |
| **Balance at end of financial period**       | ** ** | **195,552**               | ** ** | **216,678** | ** ** |
| **Accumulated impairment losses:**           |       |                      |       |   |   |
| Balance at beginning of financial period     |       | (55,785                   | )          | (348,416 | ) |
| Impairment losses for the period             |       | —                    |       | (193,000 | ) |
| Derecognised on disposal of subsidiary(1)    |       | —                    |       | 148,049 |   |
| Transferred to held for sale (note 33)(2)    |       | —                    |       | 318,630 |   |
| Net foreign exchange differences             |       | —                    |       | 18,952 |   |
| **Balance at end of financial period**       | ** ** | **(55,785**               | **)**      | **(55,785** | **)** |
| **Net book value:**                          |       |                      |       |   |   |
| **At the beginning of the financial period** | ** ** | **160,893**               | ** ** | **378,563** | ** ** |
| **At the end of the financial period**       | ** ** | **139,767**               | ** ** | **160,893** | ** ** |

 

----

(1)          This amount related to the sale of PD Ports on 20 November 2009 as part of the recapitalisation of Prime Infrastructure. The goodwill relating to the business was fully impaired at 30 June 2009.

(2)          This amount related to the Australian Energy Transmission & Distribution business which has been classified as held for sale in the year to 30 June 2010.

 

**ALLOCATION OF GOODWILL**

 

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

 

·             International Energy Group and

 

·             WestNet Rail.

 

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

 
| **Goodwill   balance** | ** ** | **IEG   $’000** | ** ** | **WestNet   Rail   $’000** | ** ** | **Total   $’000** | ** ** |
|------------------------|------------|----------------------|------------|---------------------------------|------------|------------------------|------------|
| December 2010          |       | 130,252              |       | 9,515                           |       | 139,767                |       |
| June 2010              |       | 151,378              |       | 9,515                           |       | 160,893                |       |

 

43

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**16. GOODWILL (CONTINUED)**

 

**IMPAIRMENT TESTS OF GOODWILL**

 

Goodwill within the Prime Infrastructure Group relates to IEG and WestNet Rail and the cash-generating units applicable within each of these entities. Goodwill is reviewed annually for impairment or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

 

As a result of the detailed assessment, no impairment charge was recognised in the current financial period in relation to continuing operations (June 2010: $193.0 million).  The impairment charge of goodwill in the prior year related to AET&D and was included within discontinued operations, as the business is classified as held for sale in accordance with IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’.

 

**INTERNATIONAL ENERGY GROUP**

 

The recoverable amount of this cash-generating unit is determined based on a ‘value in use’ calculation which uses cash flow projections based on financial budgets approved by management for the 2011 year with a forecast out to June 2050. The length of the forecast reflects the long-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 (June 2010: 7.41% to 8.47%). The movement in the goodwill balance in the current financial period is due to foreign exchange translation.

 

A majority of the goodwill within IEG is attributable to the UK businesses. Cash flow projections for assessing potential impairment have been based on forecast connections and inflation based on 2.5% (June 2010: 2.5%). Cash flow projections also include forecast maintenance capital expenditure.

 

No impairment charges have been recognised in relation to IEG in the current financial period.

 

**WESTNET RAIL**

 

The recoverable amount of this cash-generating unit is determined based on a ‘value in use’ calculation which uses cash flow projections based on financial budgets approved by management for the 2011 year with 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 WestNet Rail’s assets. In the current financial period, a discount rate of 10.31% (June 2010: 9.92%) has been used.

 

Cash flow projections during the budget period have been based on 2011 forecast volumes with appropriate growth assumptions beyond 2011. Inflation of 3.00% (June 2010: 2.50%) has been included in this analysis. The cash flow projections include forecast maintenance capital expenditure.

 

No impairment charges have been recognised in relation to WestNet Rail in the current financial period (June 2010: nil).

 

44

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**17. OTHER INTANGIBLE 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 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 33)       |       | —                                   |       | —                                        |       | (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**      | ** ** |
| Additions                                    |       | —                                   |       | —                                        |       | —                      |       | —                                            |       | —                                              |       | —         |       |
| Disposals                                    |       | —                                   |       | —                                        |       | —                      |       | (3,069                                            | )          | —                                              |       | (3,069         | )          |
| **Balance at 31 December 2010**              | ** ** | **—**                               | ** ** | **—**                                    | ** ** | **—**                  | ** ** | **5,980**                                         | ** ** | **—**                                          | ** ** | **5,980**      | ** ** |
| **Accumulated amortisation and impairment:** |       |                                     |       |                                          |       |                        |       |                                              |       |                                                |       |           |       |
| **Balance at 1 July 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 33)       |       | —                                   |       | —                                        |       | (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**      | ** ** |
| Amortisation expense(6)                      |       | —                                   |       | —                                        |       | —                      |       | 1,463                                             |       | —                                              |       | 1,463          |       |
| Disposals                                    |       | —                                   |       | —                                        |       | —                      |       | (3,069                                            | )          | —                                              |       | (3,069         | )          |
| **Balance at 31 December 2010**              | ** ** | **—**                               | ** ** | **—**                                    | ** ** | **—**                  | ** ** | **878**                                           | ** ** | **—**                                          | ** ** | **878**        | ** ** |
| **Net book value:**                          |       |                                     |       |                                          |       |                        |       |                                              |       |                                                |       |           |       |
| **As at 30 June 2010**                       | ** ** | **—**                               | ** ** | **—**                                    | ** ** | **—**                  | ** ** | **6,565**                                         | ** ** | **—**                                          | ** ** | **6,565**      | ** ** |
| **As at 31 December 2010**                   | ** ** | **—**                               | ** ** | **—**                                    | ** ** | **—**                  | ** ** | **5,102**                                         | ** ** | **—**                                          | ** ** | **5,102**      | ** ** |

 

----

(1)          The conservancy right was acquired as part of the acquisition of PD Ports plc in 2006 and was recorded at its fair value. The conservancy asset recognised was not amortised as it is a right in perpetuity with an indefinite life, but is subject to an annual impairment review. As part of the recapitalisation of Prime Infrastructure, PD Ports was sold for nominal proceeds.

(2)          Concession arrangements included the service concession arrangement at DBCT and key concession arrangements at various European ports. The ports’ concessions are usually awarded by Government authorities in that jurisdiction.  In the prior year, Prime Infrastructure sold part of its investment in Euroports and entered into arrangements concerning a 49.9% economic interest in DBCT. Accordingly, Prime Infrastructure no longer controls either of these assets and does not consolidate their results.

(3)          Permits include the separately identifiable asset acquired as part of the acquisition of Cross Sound Cable in the US and are amortised over the life of the main cable attached to the permit being 40 years. As part of the recapitalisation, Prime Infrastructure is carrying its investment in Cross Sound Cable as held for sale. Refer note 33 for further information.

(4)          Easement rights relate to the intangible asset that allows the Tasmanian Gas Pipeline business to access the land above the pipeline. Prime Infrastructure is carrying its investment in Tasmania Gas Pipeline within AET&D as held for sale. Refer note 33 for further information.

(5)          Contracts relate to contracts with external customers that have been purchased as part of a business combination. These contracts are within the AET&D business and accordingly are classified as held for sale.  Refer note 33 for further information.

(6)          Amortisation expense is recognised within depreciation, amortisation and impairment charge in the Income Statement.

(7)          Impairment charges are recognised within loss from discontinued operations in the Income Statement. This impairment charge related to intangibles held within the AET&D group.

 

45

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**18. TRADE AND OTHER PAYABLES**

 
| ** **                                                                     | ** ** | **Consolidated**          | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                     | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Current:**                                                                   |       |                      |       |   |   |
| Trade payables(1)                                                              |       | 76,539                    |       | 74,536 |   |
| Distribution payable                                                           |       | 8,096                     |       | 26,383 |   |
| Interest payable                                                               |       | 4,047                     |       | 11,736 |   |
| Payable to other related parties(2)                                            |       | 1,590                     |       | 5,735 |   |
| Tax related amounts within the tax-consolidated group (non-interest   bearing) |       | 25,042                    |       | 26,175 |   |
| GST and VAT payable                                                            |       | 1,744                     |       | 4,190 |   |
| Other                                                                          |       | 8,553                     |       | 11,340 |   |
| **Non-current:**                                                               |       |                      |       |   |   |
| Payable to other related parties(2)                                            |       | 14,876                    |       | 16,223 |   |
| ** **                                                                     | ** ** | **140,487**               | ** ** | **176,318** | ** ** |
| **Disclosed in the Financial Statements as:**                                  |       |                      |       |   |   |
| Current trade and other payables                                               |       | 125,611                   |       | 160,095 |   |
| Non-current trade and other payables                                           |       | 14,876                    |       | 16,223 |   |
| ** **                                                                     | ** ** | **140,487**               | ** ** | **176,318** | ** ** |

 

----

(1)          The average credit period on purchases of goods and services is 30 days. No interest is incurred on trade creditors.

(2)          Further information relating to loans to related parties is set out in note 35 to the Financial Statements.

 

**19. BORROWINGS**

 
| ** **                        | ** ** | **Consolidated**         | ** ** |
|-----------------------------------|------------|--------------------------|------------|
| ** **                        | ** ** | **Dec   2010**           | ** ** | **June   2010** | ** ** |
| ** **                        | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** |
| **Unsecured:**                    |       |                     |       |   |   |   |   |   |   |   |   |   |   |
| Bank loans(1)                     |       | —                   |       | — |   | — |   | 619,494 |   | — |   | 619,494 |   |
| Hybrid securities(2)              |       | —                   |       | — |   | — |   | 94,842 |   | — |   | 94,842 |   |
| ** **                        | ** ** | **—**               | ** ** | **—** | ** ** | **—** | ** ** | **714,336** | ** ** | **—** | ** ** | **714,336** | ** ** |
| **Secured:**                      |       |                     |       |   |   |   |   |   |   |   |   |   |   |
| Bank loans(1)                     |       | 11,884                   |       | 848,414 |   | 860,298 |   | 7,314 |   | 463,127 |   | 470,441 |   |
| Secured bonds(3)                  |       | —                   |       | 111,685 |   | 111,685 |   | — |   | 119,516 |   | 119,516 |   |
| ** **                        | ** ** | **11,884**               | ** ** | **960,099** | ** ** | **971,983** | ** ** | **7,314** | ** ** | **582,643** | ** ** | **589,957** | ** ** |
| ** **                        | ** ** | **11,884**               | ** ** | **960,099** | ** ** | **971,983** | ** ** | **721,650** | ** ** | **582,643** | ** ** | **1,304,293** | ** ** |
| Less: capitalised borrowing costs |       | —                   |       | (19,477 | ) | (19,477 | ) | — |   | (15,188 | ) | (15,188 | ) |
| ** **                        | ** ** | **11,884**               | ** ** | **940,622** | ** ** | **952,506** | ** ** | **721,650** | ** ** | **567,455** | ** ** | **1,289,105** | ** ** |

 

46

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**19. BORROWINGS (CONTINUED)**

 
| ** **                                 | ** ** | **Consolidated**         | ** ** |
|--------------------------------------------|------------|--------------------------|------------|
| ** **                                 | ** ** | **Dec 2010**        | ** ** | **June 2010** | ** ** |
| ** **                                 | ** ** | **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 |   |
| ** **                                 | ** ** | **—**               | ** ** | **—** | ** ** | **—** | ** ** | **619,494** | ** ** | **—** | ** ** | **619,494** | ** ** |
| **Secured:**                               |       |                     |       |   |   |   |   |   |   |   |   |   |   |
| WestNet Rail Group bank loan facilities(1) |       | —                   |       | 455,000 |   | 455,000 |   | — |   | — |   | — |   |
| IEG bank facility(2)                       |       | 11,884                   |       | 393,414 |   | 405,298 |   | 7,314 |   | 463,127 |   | 470,441 |   |
| ** **                                 | ** ** | **11,884**               | ** ** | **848,414** | ** ** | **860,298** | ** ** | **7,314** | ** ** | **463,127** | ** ** | **470,441** | ** ** |
| ** **                                 | ** ** | **11,884**               | ** ** | **848,414** | ** ** | **860,298** | ** ** | **626,808** | ** ** | **463,127** | ** ** | **1,089,935** | ** ** |

 

----

(1)          WestNet Rail Group completed the refinance of its previous facility during the current period.  The facilities comprise the following:

 

·                  $455.0 million term facility maturing in January 2014 that is fully drawn (June 2010: $550.0 million fully drawn).

·                  $77.0 million revolving facility maturing in January 2014 that is undrawn (June 2010: drawn to $69.5 million).

 

(2)          The IEG bank debt facilities comprise the following:

 

·                  Senior facilities totalling £235.3 million (June 2010: £237.2 million) and a junior facility totaling £16.0 million (June 2010: £16.0 million) in relation to the IEG UK business maturing in January 2013. As at December 2010, the senior facilities are drawn to $285.9 million (£188.2 million) (June 2010: $330.2 million, £187.1 million).  The junior facility is fully drawn at December 2010 ($24.3 million) (June 2010:$28.2 million).

·      Bank facilities totalling $95.1 million (£62.7 million) that are fully drawn (June 2010: ($112.0 million, £63.5 million) in relation to IEG’s Islands businesses with a maturity date of May 2016.

 
| ** **                                                 | ** ** | **Consolidated**         | ** ** |
|------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                 | ** ** | **Dec 2010**        | ** ** | **June 2010** | ** ** |
| ** **                                                 | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** |
| **2. HYBRID SECURITIES**                                   |       |                     |       |   |   |   |   |   |   |   |   |   |   |
| Prime Infrastructure Networks (New Zealand) SPARCS(1) | ** ** | **—**               | ** ** | **—** | ** ** | **—** | ** ** | **94,842** | ** ** | **—** | ** ** | **94,842** | ** ** |

 

----

(1)          In the current financial period, PINNZ redeemed all outstanding SPARCS on issue on 17 November 2010.  Holders received face value plus accrued interest in cash for each of their SPARCS under the redemption.

 

As at 30 June 2010, 119,005,156 SPARCS were on issue at a face value of NZ$119.0 million (A$94.8 million) and the interest rate was 10% per annum.

 

Prior to the redemption in the current financial period, nil SPARCS were converted into Prime Infrastructure Stapled Securities (June 2010: 36,660).

 
| ** **             | ** ** | **Consolidated**         | ** ** |
|------------------------|------------|--------------------------|------------|
| ** **             | ** ** | **Dec 2010**        | ** ** | **June 2010** | ** ** |
| ** **             | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** | **Current   $’000** | ** ** | **Non-   current   $’000** | ** ** | **Total   $’000** | ** ** |
| **3. SECURED BONDS**   |       |                     |       |   |   |   |   |   |   |   |   |   |   |
| PINNZ secured bonds(1) | ** ** | **—**               | ** ** | **111,685** | ** ** | **111,685** | ** ** | **—** | ** ** | **119,516** | ** ** | **119,516** | ** ** |

 

----

(1)          Prime Infrastructure Networks (New Zealand) Limited has on issue $111.7 million (NZ$147.1 million) in secured bonds maturing in November 2012 (June 2010: $119.5 million — NZ$147.1 million). The bonds rank pari passu to Prime Infrastructure’s other senior secured debt obligations and have the benefit of the Prime Infrastructure Deed of Common Provisions and Prime Infrastructure Security Trust Deed. As at 31 December 2010, these bonds have a fixed coupon of 9.0% (June 2010: 9.0%).

 

47

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**20. OTHER FINANCIAL LIABILITIES**

 
| ** **                                    | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **DERIVATIVES**                               |       |                           |       |   |   |
| **Current:**                                  |       |                           |       |   |   |
| Foreign currency swaps                        |       | —                         |       | 1,336 |   |
| Interest rate and inflation swaps             |       | —                         |       | 23 |   |
| **Non-current:**                              |       |                           |       |   |   |
| Foreign currency swaps                        |       | —                         |       | 2,642 |   |
| Interest rate and inflation swaps             |       | 81,649                         |       | 107,142 |   |
| ** **                                    | ** ** | **81,649**                     | ** ** | **111,143** | ** ** |
| **OTHER FINANCIAL LIABILITIES**               |       |                           |       |   |   |
| **Current:**                                  |       |                           |       |   |   |
| Other(1)                                      |       | 1,380                          |       | 3,500 |   |
| **Non-current:**                              |       |                           |       |   |   |
| Other(1)                                      |       | —                         |       | 42,217 |   |
| ** **                                    | ** ** | **1,380**                      | ** ** | **45,717** | ** ** |
| ** **                                    | ** ** | **83,029**                     | ** ** | **156,860** | ** ** |
| **Disclosed in the Financial Statements as:** |       |                           |       |   |   |
| Current other financial liabilities           |       | 1,380                          |       | 4,859 |   |
| Non-current other financial liabilities       |       | 81,649                         |       | 152,001 |   |
| ** **                                    | ** ** | **83,029**                     | ** ** | **156,860** | ** ** |

 

----

(1)          Other financial liabilities relate to outstanding deferred settlement amounts owing to the previous minority interest holders in Euroports.   The outstanding liability incurs interest at a rate of 9.99% and is due and payable on 23 August 2011.   In the current financial period, an amount of $41.3 million was repaid.

 

**21. PROVISIONS**

 
| ** **                                    | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Current:**                                  |       |                           |       |   |   |
| Employee benefits                             |       | 4,688                          |       | 4,791 |   |
| Other                                         |       | 1,322                          |       | 1,399 |   |
| **Non-current:**                              |       |                           |       |   |   |
| Employee benefits                             |       | 1,039                          |       | 1,122 |   |
| Defined benefit obligation                    |       | 2,750                          |       | 3,193 |   |
| ** **                                    | ** ** | **9,799**                      | ** ** | **10,505** | ** ** |
| **Disclosed in the Financial Statements as:** |       |                           |       |   |   |
| Current other financial liabilities           |       | 6,010                          |       | 6,190 |   |
| Non-current other financial liabilities       |       | 3,789                          |       | 4,315 |   |
| ** **                                    | ** ** | **9,799**                      | ** ** | **10,505** | ** ** |

 

48

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**21. PROVISIONS (CONTINUED)**

 
| ** **                                         | ** ** | **Asset   retirement   obligation(1)   $’000** | ** ** | **Insurance   provision   $’000** | ** ** | **Duty provision   $’000** | ** ** | **Other   provisions   $’000** | ** ** |
|----------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **Balance at 1 July 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 period(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**                           | ** ** |
| Additional provisions recognised                   |       | —                                              |       | —                                 |       | —                               |       | 283                                 |       |
| Reductions arising from remeasurement              |       | —                                              |       | —                                 |       | —                               |       | (34                                 | )          |
| Payments made in respect of provisions             |       | —                                              |       | —                                 |       | —                               |       | (322                                | )          |
| Exchange differences                               |       | —                                              |       | —                                 |       | —                               |       | (4                                  | )          |
| **Balance at 31 December 2010**                    | ** ** | **—**                                          | ** ** | **—**                             | ** ** | **—**                           | ** ** | **1,322**                           | ** ** |

 

----

(1)          Asset retirement obligations in the prior year represented the present value of future estimated costs to decommission and restore the environment of certain assets. The present value of the decommissioning costs was determined using a risk-free discount rate. The assumed costs of decommissioning were based on best estimates and therefore uncertainty existed as to the actual costs to be incurred. The asset retirement obligation relates to the AET&D and Cross Sound Cable entities and has been classified as held for sale as at 31 December 2010 and 30 June 2010.

(2)   Disposals in the prior financial year relate to provisions that were previously recognised within PD Ports which was sold on 20 November 2009.

(3)   The amounts that are transferred to held for sale in the prior financial year are included within AET&D and Cross Sound Cable.  For further information refer to note 33.

 

**22. OTHER LIABILITIES**

 
| ** **                                    | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Current:**                                  |       |                           |       |   |   |
| Deferred income(1)                            |       | 11,589                         |       | 9,236 |   |
| Other(2)                                      |       | 24,852                         |       | 24,852 |   |
| **Non-current:**                              |       |                           |       |   |   |
| Deferred income(1)                            |       | 157,954                        |       | 152,947 |   |
| Other                                         |       | —                         |       | 623 |   |
| ** **                                    | ** ** | **194,395**                    | ** ** | **187,658** | ** ** |
| **Disclosed in the Financial Statements as:** |       |                           |       |   |   |
| Current other financial liabilities           |       | 36,441                         |       | 34,088 |   |
| Non-current other financial liabilities       |       | 157,954                        |       | 153,570 |   |
| ** **                                    | ** ** | **194,395**                    | ** ** | **187,658** | ** ** |

 

----

(1)          Deferred income relates primarily to WestNet Rail and consists of cash contributions from third parties to build or upgrade existing network capabilities.   The cash payment is recorded on receipt to deferred income and recognised as revenue over the life of the contracted track access arrangement with the contributor.

(2)          The other current liability of $24.9 million relates to Queensland Rail’s contribution to the $71.3 million total assessment for stamp duty from the Western Australia Office of State Revenue in respect of the 2006 acquisition of the ARG Group by WestNet WA Rail Pty Limited. This was paid on 5 February 2010. For further information refer to notes 11 and 30.

 

49

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**23. RETIREMENT BENEFIT PLANS**

 

The Group operates four defined benefit superannuation plans for qualifying employees within its subsidiary IEG.  Under the plans, the employees are entitled to retirement benefits varying between 0% and 67% of final salary at retirement. No other post-retirement benefits are provided to these employees.

 

The defined benefit superannuation plans are funded plans. Superannuation plans compute their obligations in accordance with the actuarial requirements of the jurisdiction in which the plan is located, which prescribes a different measurement basis to that applied in these Financial Statements. The net surplus/ (deficit) determined in the plans’ most recent Financial 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 January   2009                                 |       | 106                                                          | %          | Surplus                         |       | 331                     |       |
| Guernsey Gas Limited       |       | 1 July   2009                                    |       | 152                                                          | %          | Surplus                         |       | 3,809                   |       |
| Jersey Gas Company Limited |       | 1 July   2009                                    |       | 70                                                           | %          | Deficit                         |       | (2,700                  | )          |
| Manx Gas Limited           |       | 6 April   2007                                   |       | 72                                                           | %          | Deficit                         |       | (1,933                  | )          |

 

The plan actuaries have recommended that additional contributions beyond the current contribution level be made to eliminate the deficit over a 15 year period (Manx Gas) and a 10 year period (Jersey Gas).   The actuaries for the Guernsey Gas plan have recommended contributions of the employer at 15.6% to cover the estimated cost of future accruing benefits.

 

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

 

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

 
| ** **                                            | ** ** | **Consolidated**      | ** ** |
|-------------------------------------------------------|------------|-----------------------|------------|
| ** **                                            | ** ** | **Dec 2010   %** | ** ** | **June 2010   %** | ** ** |
| Key assumptions used (expressed as weighted averages) |       |                  |       |   |   |
| Discount rate(s)                                      |       | 5.40                  |       | 5.50 |   |
| Expected return on plan assets                        |       | 5.59                  |       | 5.59 |   |
| Expected rate(s) of salary increase                   |       | 4.91                  |       | 4.90 |   |

 
| ** **                                                                                           | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                           | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Amounts recognised in profit or loss in respect of these   defined benefit plans are as follows:** |       |                           |       |   |   |
| Current service cost                                                                                 |       | 899                            |       | 2,773 |   |
| Interest cost                                                                                        |       | 983                            |       | 2,242 |   |
| Expected return on plan assets                                                                       |       | (938                           | )          | (1,868 | ) |
| **Total included in employee benefit expense (continuing   and discontinued operations)**            | ** ** | **944**                        | ** ** | **3,147** | ** ** |
| **Actuarial gains incurred during the period and   recognised in the Income Statement**              | ** ** | **427**                        | ** ** | **—** | ** ** |

 

50

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 
| ** **                                                                                                                                                         | ** ** | **Consolidated**               | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                                                         | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **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                                                                                                                |       | (34,171                        | )          | (37,534 | ) |
| Fair value of plan assets                                                                                                                                          |       | 32,699                         |       | 35,923 |   |
| ** **                                                                                                                                                         | ** ** | **(1,472**                     | **)**      | **(1,611** | **)** |
| Present value of unfunded defined benefit obligations                                                                                                              |       | —                         |       | — |   |
| **Deficit**                                                                                                                                                        | ** ** | **(1,472**                     | **)**      | **(1,611** | **)** |
| Net actuarial losses not recognised                                                                                                                                |       | 3,450                          |       | 3,960 |   |
| **Net asset arising from defined benefit obligations**                                                                                                             | ** ** | **1,978**                      | ** ** | **2,349** | ** ** |
| **Movements in the present value of the defined benefit   obligations in the current period were as follows:**                                                     |       |                           |       |   |   |
| Opening defined benefit obligations                                                                                                                                |       | (37,534                        | )          | (264,364 | ) |
| Current service cost                                                                                                                                               |       | (899                           | )          | (2,773 | ) |
| Interest cost                                                                                                                                                      |       | (983                           | )          | (2,242 | ) |
| Contributions from plan participants                                                                                                                               |       | (373                           | )          | (598 | ) |
| Actuarial (losses)/gains                                                                                                                                           |       | (599                           | )          | 303 |   |
| Disposal of subsidiary(1)                                                                                                                                          |       | —                         |       | 196,505 |   |
| Exchange differences on foreign plans                                                                                                                              |       | 5,407                          |       | 32,014 |   |
| Benefits paid                                                                                                                                                      |       | 964                            |       | 3,015 |   |
| Other                                                                                                                                                              |       | (154                           | )          | 606 |   |
| **Closing defined benefit obligation**                                                                                                                             | ** ** | **(34,171**                    | **)**      | **(37,534** | **)** |

 

----

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

 

The expense for the period is included in the employee benefits expense in the Statement of Comprehensive Income. Of the expense for the period, $0.9 million (June 2010: $3.1 million) has been included in the Income Statement as employee benefit expense.

 
| ** **                                                                                     | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                     | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Movements in the present value of the plan assets in the   current period were as follows:** |       |                           |       |   |   |
| Opening fair value of plan assets                                                              |       | 35,923                         |       | 237,451 |   |
| Expected return on plan assets                                                                 |       | 938                            |       | 1,868 |   |
| Actuarial gains/(losses)                                                                       |       | 169                            |       | (4,990 | ) |
| Exchange differences on foreign plans                                                          |       | (5,174                         | )          | (29,023 | ) |
| Contributions from the employer                                                                |       | 1,434                          |       | 1,805 |   |
| Contributions from plan participants                                                           |       | 373                            |       | 598 |   |
| Benefits paid                                                                                  |       | (964                           | )          | (3,015 | ) |
| Disposal of subsidiary(1)                                                                      |       | —                         |       | (168,771 | ) |
| **Closing fair value of plan assets**                                                          | ** ** | **32,699**                     | ** ** | **35,923** | ** ** |

 

----

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

 

51

----

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

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

 
| ** **                                               | ** ** | **Expected return** | ** ** | **Fair value of plan assets** | ** ** |
|----------------------------------------------------------|------------|--------------------------|------------|---------------------------------------------------|------------|
| ** **                                               | ** ** | **Dec 2010   %**    | ** ** | **June 2010   %**                            | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Other assets (unitised with profits, policies and bonds) |       | 5.6                      |       | 5.6                                               |       | 32,699 |   | 35,923 |   |
| **Weighted average expected return**                     | ** ** | **5.6**                  | ** ** | **5.6**                                           | ** ** | **32,699** | ** ** | **35,923** | ** ** |

 

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

 

The actual return on plan assets was a profit of $1.1 million (June 2010: $3.1 million loss).

 

The history of experience adjustments are as follows:

 
| ** **                                                       | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                       | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** | **2008   $’000** | ** ** | **2007   $’000** | ** ** |
| Fair plan of plan assets                                         |       | 32,699                         |       | 35,923 |   | 266,997 |   | 321,329 |   |
| Present value of defined benefit obligations                     |       | (34,171                        | )          | (37,534 | ) | (260,851 | ) | (280,333 | ) |
| (Deficit)/surplus                                                | ** ** | **(1,472**                     | **)**      | **(1,611** | **)** | **6,146** | ** ** | **40,996** | ** ** |
| Experience adjustments on plan liabilities — (losses)/gains |       | (599                           | )          | 303 |   | (538 | ) | 21,018 |   |
| Experience adjustments on plan assets — gains/(losses)      |       | 169                            |       | (4,990 | ) | (29,439 | ) | 9,921 |   |

 

**24. CAPITALISED BORROWING COSTS**

 
| ** **                                                  | ** ** | **Consolidated**               | ** ** |
|-------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Borrowing costs capitalised during the financial period(1)  | ** ** | **—**                     | ** ** | **43** | ** ** |
| Weighted average capitalisation on funds borrowed generally | ** ** | **—**                     | ** ** | **2.34** | **%** |

 

----

(1)          Capitalised borrowing costs were recognised by DBCT. During the prior financial year as part of the recapitalisation of Prime Infrastructure, Prime Infrastructure entered into arrangements with Brookfield Infrastructure Australia 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 longer consolidates its share of DBCT’s borrowings. Refer note 33 for further information.

 

52

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**25. ISSUED CAPITAL**

 
| ** **                                                                         | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| 353,584,177 fully paid ordinary Stapled Securities (June 2010:   351,776,795) | ** ** | **4,243,244**                  | ** ** | **4,332,865** | ** ** |

 
| ** **                                            | ** ** | **Consolidated Dec 2010** | ** ** |
|-------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                            | ** ** | **Date**                            | ** ** | **Number   ’000** | ** ** | **Issue price ($)   per Stapled   Security** | ** ** | **$’000** | ** ** |
| **Fully paid ordinary Stapled Securities**            |       |                                |       |   |   |   |   |   |   |
| Balance at beginning of financial period              |       |                                |       | 351,777 |   |   |   | 4,332,865 |   |
| September quarter distribution                   |       | 30 Nov   2010                       |       |   |   |   |   | (26,383 | ) |
| Special distribution                                  |       | 8 Dec   2010                        |       |   |   |   |   | (70,355 | ) |
| Equity component of PINNZ SPARCS                      |       | 17 Nov   2010                       |       |   |   |   |   | (1,848 | ) |
| Equity issued to acquire equity accounted investments |       | 16 Dec   2010                       |       | 1,807 |   | 4.96 |   | 8,965 |   |
| **Balance at end of financial period**                | ** ** | ** **                          | ** ** | **353,584** | ** ** | ** ** | ** ** | **4,243,224** | ** ** |

 
| ** **                                                                          | ** ** | **Consolidated June 2010** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                          | ** ** | **Date**                             | ** ** | **Number   ‘000** | ** ** | **Issue price ($)   per Stapled   Security** | ** ** | **$’000** | ** ** |
| **Fully paid ordinary Stapled Securities**                                          |       |                                 |       |   |   |   |   |   |   |
| Balance at beginning of financial period                                            |       |                                 |       | 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                                                     |       | 31   May 2010                   |       |   |   |   |   | (26,383 | ) |
| June quarter distribution                                                      |       | 30 Jun   2010                        |       |   |   |   |   | (26,383 | ) |
| Tax adjustment                                                                      |       | 30 Jun   2010                        |       |   |   |   |   | 2,324 |   |
| **Balance at end of financial period**                                              | ** ** | ** **                           | ** ** | **351,777** | ** ** | ** ** | ** ** | **4,332,865** | ** ** |

 

Changes to the then Corporations Law abolished the authorised 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 and issued shares do not have a par value.

 

**Ordinary Stapled Securities**

 

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

 

Subsequent to year end (as disclosed in note 36), on 16 February 2011 the Trusts paid a distribution out of retained earnings of $15.7 million and a return capital of $415.9 million to BIP Bermuda Holdings IV Limited, the immediate parent of Prime Infrastructure.

 

53

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**26. RESERVES**

 
| ** **                           | ** ** | **Consolidated**               | ** ** |
|--------------------------------------|------------|--------------------------------|------------|
| ** **                           | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Foreign currency translation reserve |       | (138,149                       | )          | (69,230 | ) |
| Other reserve                        |       | 25,810                         |       | 26,159 |   |
| General reserve                      |       | (17,456                        | )          | (27,774 | ) |
| Hedging reserve                      |       | (66,878                        | )          | (106,772 | ) |
| ** **                           | ** ** | **(196,673**                   | **)**      | **(177,617** | **)** |

 
| ** **                                                                         | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **FOREIGN CURRENCY TRANSLATION RESERVE**                                           |       |                           |       |   |   |
| Balance at the beginning of the financial period                                   |       | (69,230                        | )          | (82,112 | ) |
| Gain recognised on disposal of foreign subsidiary                                  |       | —                         |       | (15,752 | ) |
| Transferred to equity relating to non-current assets classified as held   for sale |       | —                         |       | 1,673 |   |
| Translation of foreign operations                                                  |       | (69,149                        | )          | 26,024 |   |
| Share of reserves of associates                                                    |       | 230                            |       | 937 |   |
| ** **                                                                         | ** ** | **(138,149**                   | **)**      | **(69,230** | **)** |

 

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

 
| ** **                                       | ** ** | **Consolidated**               | ** ** |
|--------------------------------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **OTHER RESERVE**                                |       |                           |       |   |   |
| Balance at the beginning of the financial period |       | 26,159                         |       | 2,124 |   |
| Recognised in the current financial period       |       | (349                           | )          | 24,035 |   |
| ** **                                       | ** ** | **25,810**                     | ** ** | **26,159** | ** ** |

 

Other reserve represents the amortisation to present value of related party loans that are not currently interest bearing. The majority of these loans have been discounted using a rate of between 5.86% and 6.94%.

 

54

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**26. RESERVES (CONTINUED)**

 
| ** **                                       | ** ** | **Consolidated**               | ** ** |
|--------------------------------------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **GENERAL RESERVE**                              |       |                           |       |   |   |
| Balance at the beginning of the financial period |       | (27,774                        | )          | — |   |
| Recognised in the current financial period       |       | 8,382                          |       | (13,601 | ) |
| Share of reserves of associate                   |       | 1,936                          |       | (23,045 | ) |
| Gain recognised on disposal of subsidiary        |       | —                         |       | 8,872 |   |
| ** **                                       | ** ** | **(17,456**                    | **)**      | **(27,774** | **)** |

 

The general reserve includes $38.4 million which represents Prime Infrastructure’s proportionate share of Euroports general reserve loss as at December 2010 (June 2010: $40.4 million). In addition, the general reserve includes $12.6 million relating to the acquisition of minority interests in WestNet Rail (June 2010: $12.6 million), $12.9 million gain on transfer of the Public Private Partnerships from a related party and a $4.5 million loss from the transfer of a subsidiary to a related party.

 
| ** **                                                                         | ** ** | **Consolidated**               | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **HEDGING RESERVE**                                                                |       |                           |       |   |   |
| Balance at the beginning of the financial period                                   |       | (106,772                       | )          | (77,622 | ) |
| **(Loss)/gain recognised:**Interest rate swaps                                     |       | 25,975                         |       | (23,033 | ) |
| Share of reserves of associates                                                    |       | 19,176                         |       | (39,135 | ) |
| Loss recognised on disposal of subsidiary                                          |       | —                         |       | (28,792 | ) |
| Deferred tax arising on hedges                                                     |       | (5,257                         | )          | 9,938 |   |
| Transferred to equity relating to non-current assets classified as held   for sale |       | —                         |       | 23,901 |   |
| Transferred to profit or loss                                                      |       | —                         |       | 27,971 |   |
| ** **                                                                         | ** ** | **(66,878**                    | **)**      | **(106,772** | **)** |

 

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

 

Gains and losses transferred from equity into profit or loss during the period are included in the following line items in the Income Statement:

 
| ** **     | ** ** | **Consolidated**               | ** ** |
|----------------|------------|--------------------------------|------------|
| ** **     | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Net hedge loss | ** ** | **—**                     | ** ** | **(27,971** | **)** |

 

55

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**27. ACCUMULATED LOSSES**

 
| ** **                                            | ** ** | **Consolidated**               | ** ** |
|-------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                            | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Balance at the beginning of the financial period      |       | (1,958,823                     | )          | (999,366 | ) |
| Net loss attributable to members of the parent entity |       | (80,464                        | )          | (959,457 | ) |
| **Balance at the end of the financial period**        | ** ** | **(2,039,287**                 | **)**      | **(1,958,823** | **)** |

 

**28. DISTRIBUTIONS**

 
| ** **                                                     | ** ** | **Dec 2010**             | ** ** | **June 2010** | ** ** |
|----------------------------------------------------------------|------------|-------------------------------|------------|--------------------|------------|
| ** **                                                     | ** ** | **Cents per   Security** | ** ** | **$’000**     | ** ** | **Cents per   Security** | ** ** | **$’000** | ** ** |
| **RECOGNISED AMOUNTS PER FULLY PAID STAPLED SECURITY**         |       |                          |       |               |       |   |   |   |   |
| **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 |   |
| September distribution paid 30 November 2010         |       | 7.50                          |       | 26,383             |       | — |   | — |   |
| Special distribution paid 8 December 2010                 |       | 20.00                         |       | 70,355             |       | — |   | — |   |
| ** **                                                     |       |                          | ** ** | **96,738**         |       |   | ** ** | **156,437** | ** ** |

 

As part of the successful merge of Prime Infrastructure and Brookfield Infrastructure Partners, a special distribution of $70.4 million (20 cents per Stapled Security) was declared.  The Special Distribution record date for this payment was 25 November 2010 and the payment was paid on 8 December 2010.

 

The September 2010 quarter distribution was announced on 23 August 2010 with a record date of 30 September 2010 and was paid on 30 November 2010.

 

Subsequent to year end (as disclosed in note 36), on 16 February 2011 the Trusts paid a distribution out of retained earnings of $15.7 million and a return capital of $415.9 million to BIP Bermuda Holdings IV Limited, the immediate parent entity of Prime Infrastructure.

 

In the prior financial year, distributions totalling $156.4 million were paid.

 

56

----

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

** **

**29. COMMITMENTS FOR EXPENDITURE**

 
| ** **                                                    | ** ** | **Consolidated**               | ** ** |
|---------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                    | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **(a) CAPITAL EXPENDITURE COMMITMENTS**                  |       |                           |       |   |   |
| **Plant and equipment**                                       |       |                           |       |   |   |
| Not longer than one year                                      |       | 285                            |       | 884 |   |
| Longer than one year and not longer than five years           |       | —                         |       | — |   |
| Longer than five years                                        |       | —                         |       | — |   |
|                                                          | ** ** | **285**                        | ** ** | **884** | ** ** |
| **Share of associates’ capital expenditure commitments** |       |                           |       |   |   |
| Not longer than one year                                      |       | 16,298                         |       | 25,473 |   |
| Longer than one year and not longer than five years           |       | 548                            |       | 1,405 |   |
| Longer than five years                                        |       | —                         |       | — |   |
| ** **                                                    | ** ** | **16,846**                     | ** ** | **26,878** | ** ** |
| **(b) OTHER EXPENDITURE COMMITMENTS**                    |       |                           |       |   |   |
| **Network systems and information technology**                |       |                           |       |   |   |
| Not longer than one year                                      |       | 51,833                         |       | 14,834 |   |
| Longer than one year and not longer than five years           |       | 57,620                         |       | 67,058 |   |
| Longer than five years                                        |       | 32,168                         |       | 11,693 |   |
| ** **                                                    | ** ** | **141,621**                    | ** ** | **93,585** | ** ** |
| **Other commitments — maintenance contracts**            |       |                           |       |   |   |
| Not longer than one year                                      |       | 2,138                          |       | 2,122 |   |
| Longer than one year and not longer than five years           |       | 3,340                          |       | 6,672 |   |
| Longer than five years                                        |       | —                         |       | 3,273 |   |
| ** **                                                    | ** ** | **5,478**                      | ** ** | **12,067** | ** ** |
| **Share of associates’ other expenditure commitments**   |       |                           |       |   |   |
| Not longer than one year                                      |       | 5,443                          |       | 10,135 |   |
| Longer than one year and not longer than five years           |       | 871                            |       | 983 |   |
| Longer than five years                                        |       | —                         |       | — |   |
|                                                          | ** ** | **6,314**                      | ** ** | **11,118** | ** ** |

 

**(c) LEASE COMMITMENTS**

 

Non-cancellable operating lease commitments are disclosed in note 31 to the Financial Statements.

 

57

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**30. CONTINGENT ASSETS AND LIABILITIES**

 
| ** **                                  | ** ** | **Consolidated**               | ** ** |
|---------------------------------------------|------------|--------------------------------|------------|
| ** **                                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Contingent liabilities:**                 |       |                           |       |   |   |
| Dispute with the Office of State Revenue(1) |       | 46,494                         |       | 46,494 |   |
| Bank and other guarantees(2)                |       | 21,846                         |       | 23,211 |   |
| Acquisition earn-outs(3)                    |       | 4,152                          |       | 4,926 |   |
| Other                                       |       | 425                            |       | 185 |   |
| **Contingent assets:**                      |       |                           |       |   |   |
| Acquisition earn-outs(3)                    |       | 4,152                          |       | 4,926 |   |
| DBCT revenue(4)                             |       | 1,890                          |       | 7,784 |   |
| Other                                       |       | 1,713                          |       | 1,766 |   |

 

----

(1)          On 6 January 2010, WestNet Rail Holdings Pty Limited, a wholly-owned subsidiary of the Company received an assessment notice from the Western Australian Office of State Revenue in the amount of $71.3 million, being stamp duty assessed in respect of the 2006 acquisition of the ARG Group by WestNet WA Rail Pty Limited. Prime Infrastructure believes the assessment is incorrect at law and intends to vigorously challenge it. Notwithstanding Prime Infrastructure’s objection to the assessment, payment of $46.4 million (being Prime Infrastructure’s share) was made on 5 February 2010 in accordance with the assessment.

WestNet WA Rail Pty Limited, the immediate parent of WestNet Rail Holdings No.1 Pty Limited, and also wholly owned by the Company, exercised its contractual rights of indemnity against Queensland Rail as acquirer 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 liability of WestNet Rail Holdings No.1 Pty Limited under the assessment. Accordingly, if it is ultimately determined that WestNet Rail Holdings No.1 Pty Limited is liable for the stamp duty, the net duty required to be funded by the Company would be $46.4 million. This amount has been included above as a contingent liability.

(2)          As at 31 December 2010, the Group, including its associates, had bank and customs guarantees outstanding to third parties totaling $21.8 million (June 2010: $23.2 million). These guarantees are supported by cash on deposit with banks.

(3)          An acquisition earn-out is payable to the vendor of Rauma Stevedoring in the situation where Euroports Finland receives a binding option right to operate in a proposed new container terminal in Europe for between 15 and 30 years. The amount payable would be $6.9 million (June 2010: $7.5 million) and would be recognised as an asset.  Prime’s proportionate share of this is $4.2 million (June 2010: $4.9 million). The movement between December 2010 and June 2010 is related to movements in foreign exchange.

(4)          DBCT is entitled to commence earning revenue on its expansion of DBCT from the first day of the month following commissioning of an expansion. DBCT is currently invoicing 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, which based on current estimates will exceed the approved forecast costs, these will be submitted to the QCA which, if approved, would result in a catch up of revenue being due to DBCT. This revenue would be backdated to the first day of the month following commissioning. The amount due, should all costs be approved, has been calculated as $3.8 million as at 31 December 2010 (June 2010: $15.5 million). Prime Infrastructure has disclosed $1.9 million as a contingent asset as at 31 December 2010 being its 50.1% proportionate share (June 2010: $7.8 million).

(5)          Tas Gas Networks Pty Limited has entered into a Deed of Settlement with the Tasmanian Government indemnifying the Government against any losses or damages on the constructed gas network for a period of 10 years. The extent to which an outflow or cash will be required cannot be determined in relation to this indemnity.

(6)          On 31 August 2007, Prime Infrastructure was part of a consortium that acquired the Alinta Limited business. As part of this transaction, Prime Infrastructure is party to the Amended Umbrella Agreement (amended 30 August 2007) and Participation Deed. The interaction of these two agreements was that Prime Infrastructure was responsible for its proportionate percentage for any unallocated liabilities which do not relate specifically to a consortium business. Any known liabilities in relation to unallocated liabilities were recognised as at 30 June 2010.  In the current financial period, the Amended Umbrella Agreement and Participation Deeds were settled between the consortium.  No additional contingent liabilities have been recognised.

(7)          Prior to Prime Infrastructure’s acquisition of certain Alinta Limited businesses in 2007, Alinta Limited and Alinta 2000 Limited agreed to guarantee the obligations of various companies within the Alinta group. Following the Scheme of Arrangement under which a consortium including Prime Infrastructure acquired the Alinta businesses, Prime Infrastructure acquired the guaranteeing entities, while some of the subsidiaries being guaranteed were acquired by Alinta Energy Limited (formerly Babcock & Brown Power).

Whilst Alinta Limited and Alinta 2000 Limited are guaranteeing obligations of an Alinta Energy subsidiary, as part of the consortium arrangements relating to the acquisition of Alinta Limited, Alinta Energy has agreed to indemnify Prime Infrastructure against, among other things all losses sustained to the extent that such losses relate to Alinta Energy’s assets. Accordingly, to the extent that Prime Infrastructure sustains any losses pursuant to the guarantee, Alinta Energy has agreed to indemnify Prime Infrastructure for such loss.   In the current financial period, all agreements have been terminated between the consortium.  No additional contingent liabilities have been recognised.

(8)          An associate of Prime Infrastructure has established an environmental provision of $3.1 million (Prime Infrastructure’s share is $0.8 million) at 31 December 2010 (June 2010: $2.3 million — Prime Infrastructure share was $0.6 million) to address remediation issues with four projects. The associate is subject to a variety of federal, state and local laws that regulate permitted activities relating to air and water quality, waste disposal and other environmental matters. After consideration of provisions established, Prime Infrastructure believes that costs for environmental remediation and ongoing compliance with these laws will not have a material adverse impact on the Group.

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

(9)          The Group is defendant in various lawsuits arising from the day-to-day operations of its businesses. Although no assurance can be given, the Directors believe, based on experience to date, that the ultimate resolution of such matters will not have a material adverse impact on the Prime Infrastructure business, cash flows, financial position or results of operations.

 

58

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

** **

**31. LEASES**

 

**DISCLOSURE FOR LESSEES**

 

**Operating leases**

 

***Leasing arrangements***

 

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

 
| ** **                                                | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Non-cancellable operating lease payments**              |       |                           |       |   |   |
| Not longer than one year                                  |       | 1,958                          |       | 2,075 |   |
| Longer than one year and not longer than five years       |       | 5,909                          |       | 8,436 |   |
| Longer than five years                                    |       | 17,187                         |       | 19,178 |   |
|                                                      | ** ** | **25,054**                     | ** ** | **29,689** | ** ** |
| **Share of associates’ operating lease commitments** |       |                           |       |   |   |
| **Non-cancellable operating lease payments**              |       |                           |       |   |   |
| Not longer than one year                                  |       | 11,031                         |       | 13,552 |   |
| Longer than one year and not longer than five years       |       | 37,854                         |       | 46,795 |   |
| Longer than five years                                    |       | 151,025                        |       | 199,571 |   |
| ** **                                                | ** ** | **199,910**                    | ** ** | **259,918** | ** ** |

 

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

 
| ** **           | ** ** | **Consolidated**               | ** ** |
|----------------------|------------|--------------------------------|------------|
| ** **           | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Lease incentives** |       |                           |       |   |   |
| Current              |       | —                         |       | — |   |
| Non-current          |       | —                         |       | 623 |   |
|                 | ** ** | **—**                     | ** ** | **623** | ** ** |

 

In the prior year, the non-cancellable operating leases were in relation to an entity which has been subsequently transferred out of the Prime Infrastructure Holdings Limited group.

 
| ** **                                                | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **Share of associates’ operating lease receivables** |       |                           |       |   |   |
| Not longer than one year                                  |       | 1,038                          |       | 2,006 |   |
| Longer than one year and not longer than five years       |       | 2,750                          |       | 4,837 |   |
| Longer than five years                                    |       | 2,007                          |       | 4,163 |   |
| ** **                                                | ** ** | **5,795**                      | ** ** | **11,006** | ** ** |

 

59

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**32. SUBSIDIARIES**

 
| ** **                                                    | ** ** | ** **                          | ** ** | **Ownership interest** | ** ** |
|---------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                  | ** ** | **Country of   incorporation** | ** ** | **Dec 2010   %**       | ** ** | **June 2010   %** | ** ** |
| **Parent entity:**                                            |       |                                |       |                        |       |   |   |
| Prime Infrastructure Holdings Limited(3)                 |       | Australia                           |       |                        |       |   |   |
| **Subsidiaries:**                                             |       |                                |       |                        |       |   |   |
| Prime Infrastructure Trust                               |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Infrastructure Trust 2                             |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Infrastructure Employment Pty Limited(3)           |       | Australia                           |       | 100                         |       | 100 |   |
| Prime BFK Trust                                               |       | Australia                           |       | 100                         |       | 100 |   |
| ARL2B Partnership                                             |       | Australia                           |       | 100                         |       | 100 |   |
| BBI Energy Trust(6)                                           |       | Australia                           |       | —                      |       | 100 |   |
| Prime NGPL Trust                                              |       | Australia                           |       | 100                         |       | 100 |   |
| Prime TC Holdings Pty Limited(3)                              |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Infrastructure Finance Pty Limited(3)              |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Energy Partnership Pty Limited(3)                       |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Energy (Redbank) Pty Limited(3)                         |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Energy (Wind) Pty Limited(3)                            |       | Australia                           |       | 100                         |       | 100 |   |
| Australian Company Number 108 247 123 Pty Limited(3)          |       | Australia                           |       | 100                         |       | 100 |   |
| Australian Company Number 108 247 098 Pty Limited(3)          |       | Australia                           |       | 100                         |       | 100 |   |
| DBCT Management Pty Limited(3),(4)                       |       | Australia                           |       | 100                         |       | 100 |   |
| DBCT Finance Pty Limited(3),(4)                               |       | Australia                           |       | 100                         |       | 100 |   |
| DBCT Trust(4)                                                 |       | Australia                           |       | 100                         |       | 100 |   |
| DBCT Investor Services Pty Limited(3),(4)                     |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Networks (Australia) Pty Limited(3)                     |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Networks (Australia) No.2 Pty Limited(3)                |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Infrastructure Networks (New Zealand) Limited      |       | New Zealand                         |       | 100                         |       | 100 |   |
| Prime Infrastructure Networks (New Zealand) No.2 Limited |       | New Zealand                         |       | 100                         |       | 100 |   |
| Prime Infrastructure Networks (New Zealand) No.3 Limited |       | New Zealand                         |       | 100                         |       | 100 |   |
| Tas Gas Holdings Pty Limited(3)                               |       | Australia                           |       | 100                         |       | 100 |   |
| Prime TGN Pty Limited (formerly BBI TGN Pty Limited)(3)       |       | Australia                           |       | 100                         |       | 100 |   |
| BBI PES Pty Limited(3)                                        |       | Australia                           |       | 100                         |       | 100 |   |
| Tas Gas Retail Pty Limited(3)                                 |       | Australia                           |       | 100                         |       | 100 |   |
| Tas Gas Networks Pty Limited(3)                               |       | Australia                           |       | 100                         |       | 100 |   |
| Brookfield Cogen Australia Pty Limited(1),(3)            |       | Australia                           |       | 100                         |       | — |   |
| Prime IEG Australia Holdings Pty Limited(3)                   |       | Australia                           |       | 100                         |       | 100 |   |
| Prime IEG Australia No.1 Pty Limited(3)                       |       | Australia                           |       | 100                         |       | 100 |   |
| Prime IEG Australia No.2 Pty Limited(3)                       |       | Australia                           |       | 100                         |       | 100 |   |
| IEG Infrastructure Limited                                    |       | United Kingdom                      |       | 100                         |       | 100 |   |
| IEG Finance Limited                                           |       | United Kingdom                      |       | 100                         |       | 100 |   |
| IEG Guernsey Limited                                          |       | Guernsey                            |       | 100                         |       | 100 |   |
| International Energy Group 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 |   |

 

60

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**32. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                   | ** ** | ** **                          | ** ** | **Ownership interest** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                 | ** ** | **Country of   incorporation** | ** ** | **Dec 2010   %**       | ** ** | **June 2010   %** | ** ** |
| 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(3)                           |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Finance UK Limited                                     |       | United Kingdom                      |       | 100                         |       | 100 |   |
| Prime CSC Holdings Pty Limited(3)                            |       | Australia                           |       | 100                         |       | 100 |   |
| CSCC US Holdings LLC(2)                                      |       | United States of   America          |       | 100                         |       | 100 |   |
| CSCC Holdings LLC(2)                                         |       | United States of   America          |       | 100                         |       | 100 |   |
| CSCC LLC(2)                                                  |       | United States of   America          |       | 100                         |       | 100 |   |
| CSC Operations LLC(2)                                        |       | United States of   America          |       | 100                         |       | 100 |   |
| Cross-Sound Cable Company LLC(2)                             |       | United States of   America          |       | 100                         |       | 100 |   |
| Cross-Sound Cable Company (New York) LLC(2)                  |       | United States of   America          |       | 100                         |       | 100 |   |
| CSCC TBC Holdings LLC(2)                                     |       | United States of   America          |       | 100                         |       | 100 |   |
| CSCC TBC LLC(2)                                              |       | United States of   America          |       | 100                         |       | 100 |   |
| TBC Operations LLC(2)                                   |       | United States of   America          |       | 100                         |       | 100 |   |
| Prime Rail Holdings Pty Limited(3)                           |       | Australia                           |       | 100                         |       | 100 |   |
| Babcock & Brown WA Rail Trust(3)                    |       | Australia                           |       | 100                         |       | 100 |   |
| Prime WA Rail TC Pty Limited(3)                              |       | Australia                           |       | 100                         |       | 100 |   |
| Prime MI TC Pty Limited(3)                              |       | Australia                           |       | 100                         |       | 100 |   |
| MI Trust(3)                                                  |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet WA Rail Pty Limited(3)                               |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail Holdings No.1 Pty Limited(3)                    |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail Holdings No.2 Pty Limited(3)                    |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail Employment Pty Limited(3)                       |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail Pty Limited(3)                                  |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail NarrowGauge Pty Limited(3)                      |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Rail StandardGauge Pty Limited(3)                    |       | Australia                           |       | 100                         |       | 100 |   |
| Prime US Holdings Pty Limited(3)                             |       | Australia                           |       | 100                         |       | 100 |   |
| Prime GP (Aust) Holdings I Pty Limited(3)                    |       | Australia                           |       | 100                         |       | 100 |   |
| Prime GP (Aust) Holdings II Pty Limited(3)                   |       | Australia                           |       | 100                         |       | 100 |   |
| Prime GP (Aust) Pty Limited(3)                               |       | Australia                           |       | 100                         |       | 100 |   |
| Prime US Investments Pty Limited(3)                          |       | Australia                           |       | 100                         |       | 100 |   |
| ACN 134 741 567 Pty Limited(3)                               |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Europe Holdings Pty Limited(3)                         |       | Australia                           |       | 100                         |       | 100 |   |
| Prime Infrastructure Europe Holdings (Malta I) Limited  |       | Malta                               |       | 100                         |       | 100 |   |
| Prime Infrastructure Europe Holdings (Malta II) Limited |       | Malta                               |       | 100                         |       | 100 |   |
| Prime AET&D Holdings No.1 Pty Limited                    |       | Australia                           |       | 100                         |       | 100 |   |
| Prime AET&D Holdings No.2 Pty Limited                    |       | Australia                           |       | 100                         |       | 100 |   |

 

61

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**32. SUBSIDIARIES (CONTINUED)**

 
| ** **                                                                                                | ** ** | ** **                          | ** ** | **Ownership interest** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|-----------------------------|------------|
| **Name of entity**                                                                              | ** ** | **Country of   incorporation** | ** ** | **Dec 2010   %**       | ** ** | **June 2010   %** | ** ** |
| Prime AET&D Holdings No.3 Pty Limited                                                                 |       | Australia                           |       | 100                         |       | 100 |   |
| Prime AET&D Holdings No.4 Pty Limited                                                                 |       | Australia                           |       | 100                         |       | 100 |   |
| Prime WestNet Holdings Pty Limited(2)                                                                     |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet WA Infrastructure Holdings Pty Limited (formerly WestNet WA   Infrastructure Holdings Limited)(2) |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Infrastructure Group Pty Limited (formerly WestNet Infrastructure   Group Limited)(2)             |       | Australia                           |       | 100                         |       | 100 |   |
| Tasmanian Gas Pipeline Pty Limited(2)                                                                     |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Energy Pty Limited(2)                                                                             |       | Australia                           |       | 100                         |       | 100 |   |
| WNG Finance Pty Limited(2)                                                                                |       | Australia                           |       | 100                         |       | 100 |   |
| Alinta DBNGP Pty Limited(2)                                                                               |       | Australia                           |       | 100                         |       | 100 |   |
| WA Network Holdings Pty Limited(2)                                                                        |       | Australia                           |       | 74.1                        |       | 74.1 |   |
| WA Gas Networks Pty Limited(2)                                                                            |       | Australia                           |       | 74.1                        |       | 74.1 |   |
| ANetworks Pty Limited(2)                                                                                  |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Energy Services Pty Limited(2)                                                                    |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Energy AET&D Holdings No.1 Pty Limited(2)                                                     |       | Australia                           |       | 100                         |       | 100 |   |
| WestNet Energy AET&D Holdings No.2 Pty Limited(2)                                                     |       | Australia                           |       | 100                         |       | 100 |   |
| Brookfield Infrastructure Showgrounds Holdings Pty Limited(3),(5)                                         |       | Australia                           |       | 100                         |       | — |   |
| Brookfield Infrastructure Showgrounds Investments Pty Limited(3),(5)                                      |       | Australia                           |       | 100                         |       | — |   |
| Brookfield Infrastructure Showgrounds Pty Limited(3),(5)                                                  |       | Australia                           |       | 100                         |       | — |   |
| Brookfield Infrastructure Long Bay Holdings Pty Limited(3),(5)                                            |       | Australia                           |       | 100                         |       | — |   |
| Brookfield Infrastructure Long Bay Investments Pty Limited(3),(5)                                         |       | Australia                           |       | 100                         |       | — |   |
| Brookfield Infrastructure Long Bay Pty Limited(3),(5)                                                     |       | Australia                           |       | 100                         |       | — |   |

 

----

(1)          This entity was established during the current financial period.

(2)          As part of the recapitalisation of Prime Infrastructure that was completed on 20 November 2009, the AET&D group and Cross Sound Cable were classified as held for sale.

(3)          These companies are members of the Prime Infrastructure Holdings Limited tax-consolidated group.  Prime Infrastructure Holdings Limited is the head entity in the tax-consolidated group.

(4)          As part of the recapitalisation of Prime Infrastructure that was completed on 20 November 2009, Prime Infrastructure no longer controls DBCT and accounts for its 50.1% economic interest as an equity accounted investment.

(5)          These entities were acquired on 16 December 2010 from a related entity.   Refer note 35 for further information.

(6)          This trust was dissolved during the current financial period.

 

62

----

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**33. DISCONTINUED OPERATIONS**

 

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

 

As part of the recapitalisation of Prime Infrastructure which was completed on 20 November 2009, Prime Infrastructure announced that it would classify its interests in AET&D and Cross Sound Cable as held for sale.  Prime Infrastructure and Brookfield Asset Management are using reasonable endeavours to affect a sale of the assets as soon as practicable.  Prime Infrastructure has issued an option to the former BEPPA holders to receive any proceeds in relation to the disposal of the AET&D assets, whilst a twelve month option (with an option in favour of Brookfield for a further two periods of twelve months of which the first extension option has been exercised) has been issued to Brookfield to acquire Cross Sound Cable.

 

Prime Infrastructure has written down its investment in AET&D to nil value and this has resulted in an impairment of $40.3 million (30 June 2010: $662.6 million) being recognised in the current financial period.  This has been disclosed within discontinued operations.

 

**COMPARATIVE PERIODS:**

 

In the prior comparative period the following investments were also included within discontinued operations:

 

**EUROPORTS GROUP**

 

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

 

The agreed price under the Amended Share Subscription Agreement for the 40% interest was €141.5 million ($243.3 million). The agreed price included equity contribution, interest-bearing loans and non-share equity interests (debt). Furthermore, included within the 33.89% interest acquired to date is a convertible bond held by Antin IP (€8.05m), which if converted, would result in additional equity of 5.97% being issued.  The bond was subsequently converted in the current financial period.

 

The amended Share Subscription Agreement includes a share equalisation process in years 2012 and 2013 based on the performance of Euroports through that time. Depending on Euroports performance, the aggregate equity owned by Antin IP and Arcus will be adjusted from the potential up-front 40% (including conversion of the convertible bond) holdings to an amended holding of between 34% and 65% (to be held between Antin IP and Arcus on the same proportional basis as the up-front holding assuming Antin IP converts its convertible bond into equity).

 

The net proceeds received from the share subscription agreement were used to repay $60.2 million of financial liabilities (€35.0m). A loss of $82.6 million was recognised on this disposal.   An impairment of $111.1 million was recognised in the year ended 30 June 2010 on the anticipated outcome in respect of the Share Equalisation Adjustment mechanism.

 

**DALRYMPLE BAY COAL TERMINAL**

 

As part of the recapitalisation of Prime Infrastructure which was completed on 20 November 2009, Prime Infrastructure Trust issued Convertible Notes to Brookfield Infrastructure Australia Trust for $295.4 million 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 with Brookfield Infrastructure Australia Trust, Prime Infrastructure remained responsible for the outcome of the subsequently settled tax dispute with the ATO regarding payments made at DBCT.

 

In accordance with Accounting Standards, Prime Infrastructure is deemed to have joint control of Dalrymple Bay Coal Terminal, and therefore equity accounts its investment from the date at which control was lost (20 November 2009). The transaction resulted in a gain of $20.5 million being recognised which is included within discontinued operations.

 

**PD PORTS**

 

As part of the recapitalisation of Prime Infrastructure which was completed on 20 November 2009, Brookfield acquired 100% of Prime Infrastructure’s interests in PD Ports for nominal proceeds. As part of this transaction, Brookfield repaid the £100.0 million ($181.0 million) in term and acquisition facilities within PD Ports and the termination costs of associated swaps. This transaction resulted in Prime Infrastructure recognising a loss of $247.2 million in the financial year ended 30 June 2010 which is included within discontinued operations.

 

63

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**33. DISCONTINUED OPERATIONS (CONTINUED)**

 
| ** **                                                                                               | ** ** | **Consolidated**                                      | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                               | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| **Profit from discontinued operations:**                                                                 |       |                                                  |       |   |   |
| Revenue                                                                                                  |       | 109,240                                               |       | 544,927 |   |
| Other income                                                                                             |       | 17,146                                                |       | 15,651 |   |
| **Total income**                                                                                         | ** ** | **126,386**                                           | ** ** | **560,578** | ** ** |
| Share of profits from associates and jointly controlled entities   accounted for using the equity method |       | 10,878                                                |       | 10,388 |   |
| Employee benefit expense                                                                                 |       | (18,693                                               | )          | (79,444 | ) |
| Transmission and direct costs                                                                            |       | (5,887                                                | )          | (152,292 | ) |
| Depreciation, amortisation and impairment expense                                                        |       | (40,285                                               | )          | (713,297 | ) |
| Finance costs                                                                                            |       | (57,129                                               | )          | (168,950 | ) |
| Net hedge gain/(loss)                                                                                    |       | 9,411                                                 |       | (58,238 | ) |
| Operating and management charges                                                                         |       | (23,650                                               | )          | (64,743 | ) |
| Other expenses                                                                                           |       | (13                                                   | )          | (235 | ) |
| **Total expense**                                                                                        | ** ** | **(125,368**                                          | **)**      | **(1,226,811** | **)** |
| **Profit/(loss) before income tax expense**                                                              | ** ** | **1,018**                                             | ** ** | **(666,233** | **)** |
| Attributable income tax expense (note 7)                                                                 |       | (7,325                                                | )          | (5,446 | ) |
| **Loss after income tax**                                                                                | ** ** | **(6,307**                                            | **)**      | **(671,679** | **)** |
| Loss on disposal of business/discontinued operations (note 37(b))                                        |       | —                                                |       | (329,831 | ) |
| Profit on disposal of business (note 37(b))                                                              |       | —                                                |       | 20,618 |   |
| **Loss from discontinued operations**                                                                    | ** ** | **(6,307**                                            | **)**      | **(980,892** | **)** |
| **Cash flows from discontinued operations:**                                                             |       |                                                  |       |   |   |
| Net cash flows from operating activities                                                                 |       | 27,441                                                |       | 81,785 |   |
| Net cash flows from investing activities                                                                 |       | (18,537                                               | )          | (203,612 | ) |
| Net cash flows from financing activities                                                                 |       | 79                                                    |       | 23,941 |   |
| **Net cash flows**                                                                                       | ** ** | **8,983**                                             | ** ** | **(97,886** | **)** |

 

64

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**33. DISCONTINUED OPERATIONS (CONTINUED)**

 

The major classes of assets and liabilities comprising the businesses classified as held for sale are AET&D and Cross Sound Cable  are as follows:

 
| ** **                                                  | ** ** | **Consolidated**               | ** ** |
|-------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **CURRENT ASSETS**                                          |       |                           |       |   |   |
| Cash and cash equivalents (note 37(a))                      |       | 64,191                         |       | 96,100 |   |
| Trade and other receivables                                 |       | 32,324                         |       | 38,663 |   |
| Other financial assets                                      |       | 3,251                          |       | 4,960 |   |
| Inventories                                                 |       | 1,059                          |       | 1,040 |   |
| Current tax receivables                                     |       | 6,378                          |       | 12,061 |   |
| Other current assets                                        |       | 5,303                          |       | 5,867 |   |
| **Total**                                                   | ** ** | **112,506**                    | ** ** | **158,691** | ** ** |
| **NON-CURRENT ASSETS**                                      |       |                           |       |   |   |
| Debt service reserve deposit                                |       | 315                            |       | 1,028 |   |
| Investments accounted for using the equity method (note 13) |       | 279,527                        |       | 260,000 |   |
| Property, plant and equipment (note 14)                     |       | 1,267,981                      |       | 1,314,181 |   |
| Other intangible assets (note 17)                           |       | 110,569                        |       | 119,009 |   |
| Deferred tax assets                                         |       | 33,209                         |       | 39,001 |   |
| Other non-current assets                                    |       | 21,805                         |       | 21,208 |   |
| **Total**                                                   | ** ** | **1,713,406**                  | ** ** | **1,754,427** | ** ** |
| **Total assets classified as held for sale**                | ** ** | **1,825,912**                  | ** ** | **1,913,118** | ** ** |
| **CURRENT LIABILITIES**                                     |       |                           |       |   |   |
| Trade and other payables                                    |       | (25,617                        | )          | (70,788 | ) |
| Borrowings                                                  |       | (1,091,933                     | )          | (745,656 | ) |
| Other financial liabilities                                 |       | (35,582                        | )          | (55,698 | ) |
| Provisions                                                  |       | (11,851                        | )          | (14,860 | ) |
| Other current liabilities                                   |       | (2,966                         | )          | (928 | ) |
| **Total**                                                   | ** ** | **(1,167,949**                 | **)**      | **(887,930** | **)** |
| **NON-CURRENT LIABILITIES**                                 |       |                           |       |   |   |
| Trade and other payables                                    |       | (2,506                         | )          | (2,813 | ) |
| Borrowings                                                  |       | (327,975                       | )          | (703,879 | ) |
| Other financial liabilities                                 |       | (14,661                        | )          | (22,751 | ) |
| Deferred tax liability                                      |       | (281,232                       | )          | (280,958 | ) |
| Provisions                                                  |       | (50,810                        | )          | (52,410 | ) |
| Other non-current liabilities                               |       | (7,279                         | )          | (7,389 | ) |
| **Total**                                                   | ** ** | **(684,463**                   | **)**      | **(1,070,200** | **)** |
| **Total liabilities associated with assets held for sale**  | ** ** | **(1,852,412**                 | **)**      | **(1,958,130** | **)** |
| **Net liabilities classified as held for sale**             | ** ** | **(26,500**                    | **)**      | **(45,012** | **)** |

 

65

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**34. KEY MANAGEMENT PERSONNEL REMUNERATION**

 

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

 

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

 
| ** **                     | ** ** | **Consolidated**                             | ** ** |
|--------------------------------|------------|----------------------------------------------|------------|
| ** **                     | ** ** | **Dec 2010********(6 months)   $** | ** ** | **June 2010********(12 months)   $** | ** ** |
| Short-term employment benefits |       | 2,207,000                                    |       | 5,987,349 |   |
| Post-employment benefits       |       | 37,988                                       |       | 72,305 |   |
| Share-based payments           |       | 372,855                                      |       | 474,733 |   |
| ** **                     | ** ** | **2,617,843**                                | ** ** | **6,534,387** | ** ** |

 

Certain KMP (excluding Independent Directors) were not paid directly by the Group during the previous financial year. These KMP were remunerated by the Babcock & Brown Infrastructure Management Pty Limited (the Manager) up to 31 October 2009. Upon separation from Babcock & Brown, all KMP were employed directly by Prime Infrastructure.

 

**(b) REMUNERATION OF DIRECTORS**

 

The aggregate compensation to the Directors of the Group is set out below:

 
| ** **                     | ** ** | **Consolidated**                             | ** ** |
|--------------------------------|------------|----------------------------------------------|------------|
| ** **                     | ** ** | **Dec 2010********(6 months)   $** | ** ** | **June 2010********(12 months)   $** | ** ** |
| Short-term employment benefits |       | 267,586                                      |       | 532,113 |   |
| Post-employment benefits       |       | 10,692                                       |       | 44,021 |   |
| Share-based payments           |       | —                                       |       | — |   |
| ** **                     | ** ** | **278,278**                                  | ** ** | **576,134** | ** ** |

 

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

 

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

 
| ** **                     | ** ** | **Consolidated**                             | ** ** |
|--------------------------------|------------|----------------------------------------------|------------|
| ** **                     | ** ** | **Dec 2010********(6 months)   $** | ** ** | **June 2010********(12 months)   $** | ** ** |
| Short-term employment benefits |       | 2,474,586                                    |       | 6,519,462 |   |
| Post-employment benefits       |       | 48,680                                       |       | 116,326 |   |
| Share-based payments           |       | 372,855                                      |       | 474,733 |   |
| ** **                     | ** ** | **2,896,121**                                | ** ** | **7,110,521** | ** ** |

 

66

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**35. RELATED PARTY DISCLOSURES**

 

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

 

**Equity interests in subsidiaries**

 

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 32 to the Financial Statements.

 

**Equity interests in associates and joint ventures**

 

In the current financial period Prime Infrastructure acquired 100% of the equity in Brookfield Infrastructure Long Bay Holdings Pty Limited which in turn has a 50% equity interest in the Long Bay Public Private Partnership and 100% of the equity in Brookfield Infrastructure Showgrounds Holdings Pty Limited which has a 50% equity interest in the Melbourne Showgrounds Public Private Partnership.  In the prior financial year, Prime Infrastructure sold 33.89% of its investment in Euroports (and a further 6.11% in the current financial period) and entered into arrangements regarding a 49.9% economic interest in Dalrymple Bay Coal Terminal. Further information in relation to equity interests in associates and joint ventures is disclosed in note 13 to the Financial Statements.

 

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

 

Other related parties include:

 

·             the parent entity

 

·             entities with significant influence over Prime Infrastructure

 

·             associates

 

·             joint ventures in which the entity is a venturer

 

·             subsidiaries

 

·             other related parties.

 

Amounts receivable from and payable to related parties are disclosed in notes 8, 9, and 18 to the Financial Statements. All loans advanced to and payable to related parties are unsecured. Interest is charged on certain loans at a variable rate based on the BBSW plus a margin. During the current year, Prime Infrastructure Holdings Limited (the Company) received interest of $66,815,647 (June 2010: $132,588,611) from its intercompany loans with its wholly owned subsidiaries.

 

An impairment charge on loans to an associate of $21,507,251 million has been recognised in the current financial period (June 2010: $95,657,953).

 

Transactions and balances between the Company and its subsidiaries were eliminated in full in the preparation of consolidated Financial Statements of the Group.

 

**Transactions involving the parent entity:**

 

As at 31 December 2010, Prime Infrastructure Holdings Limited has recognised a net payable of $201,544,011 (June 2010: $179,395,689) from the members of the tax-consolidated group for the transfer of current and prior year tax losses.

 

**Transactions involving other related parties:**

 

In the prior financial year, Prime Infrastructure cancelled 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 were no longer considered to be a related party from 20 November 2009.

 

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

 

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

 
| ** **                                                                                                                    | ** ** | **Dec 2010********(6 months)   $** | ** ** | **June 2010********(12 months)   $** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------|------------|
| **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                                      |       |
| Management service fee                                                                                                        |       | —                                       |       | 4,146,215                                      |       |
| Reimbursement of operating costs                                                                                              |       | —                                       |       | 3,879,828                                      |       |
| Purchase of assets                                                                                                            |       | —                                       |       | 92,500                                         |       |

 

67

----

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

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

 

**Transactions involving other related parties (continued):**

 

During the period, the following transactions were made with associates. All amounts were based on commercial terms.

 
| ** **                                                     | ** ** | **Dec 2010   $** | ** ** | **June 2010   $** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| **Received/receivable from associates:**                       |       |                  |       |                   |       |
| Interest received from associates(1)                           |       | 46,477,579            |       | 90,125,600             |       |
| Unwinding of unrealised discount on loans to associates        |       | 335,357               |       | 657,055                |       |
| Dividends received from associates                             |       | 2,912,106             |       | 26,482,612             |       |
| Return of capital from associates(2)                           |       | —                |       | 10,703,440             |       |
| Revenue recognised in relation to contractual capital projects |       | 7,669,618             |       | 31,207,589             |       |
| Service fees charged to associate entities(3)                  |       | 810,924               |       | 1,568,011              |       |
| Fees received for services provided to subsidiary of associate |       | —                |       | 40,193                 |       |
| **Paid/payable to associates:**                                |       |                  |       |                   |       |
| Interest paid to associates                                    |       | 532,806               |       | —                 |       |
| **Received/receivable from Brookfield related   entities:**    |       |                  |       |                   |       |
| Reimbursement of costs in relation to Scheme implementation    |       | 8,100,000             |       | —                 |       |
| Fees received in relation to employee secondment               |       | 154,828               |       | 123,862                |       |
| **Paid/payable to Brookfield related entities:**               |       |                  |       |                   |       |
| Transaction facilitation fee(4)                                |       | —                |       | 18,500,000             |       |
| Commitment fees (6)                                            |       | 620,316               |       | —                 |       |
| Asset management service fees paid (5)                         |       | 3,957,868             |       | 4,248,948              |       |
| Director fees paid to Brookfield                               |       | 209,750               |       | 257,526                |       |
| Computer support fees                                          |       | 33,006                |       | —                 |       |
| Reimbursement of operating costs                               |       | 63,284                |       | 1,575                  |       |

 

----

(1)          Interest received from associates represents interest Prime Infrastructure received on its loans to DBCT Management, Myria Holdings Inc, Euroports S.á.r.l and Powerco New Zealand Holdings Limited.

(2)          During the prior year, Prime Infrastructure received funds from Myria Holdings Inc. in the form of a return of capital.

(3)          Prime Infrastructure continues to provide certain management services to Dalrymple Bay Coal Terminal based on an arms length basis.

(4)          In the prior year, Prime Infrastructure agreed to pay Brookfield a transaction facilitation fee inclusive of out of pocket expenses and other costs up to a maximum of $18,500,000 on the successful recapitalisation.

(5)          Brookfield provides certain asset management services to the AET&D businesses and Cross Sound Cable. These services include providing strategic advice, overseeing the sales process, supervising operations, making recommendations regarding financing, prepare operational plans.

The asset management agreements have a term of 3 years, but will terminate early should the associated sale options expire and may be extended by the mutual agreement of Prime Infrastructure and Brookfield.

In relation to AET&D, Brookfield is entitled to a fee of $5.0 million per annum asset management fee, payable quarterly in advance and a transaction fee payable at the time of sale of any part of the AET&D business to a third party, equal to 1% of the enterprise value of that part of the business, payable out of the proceeds of any such sale.  In relation to Cross Sound Cable, Brookfield is entitled to a base asset management fee equal to the distributable cash generated by the Cross Sound Cable operations during the applicable month and the transaction fee will be equal to 1% of the aggregate enterprise value of Cross Sound Cable based on its sale price.

(6)          During the current period, Prime Infrastructure replaced its Corporate facility with external lenders with a similar facility with an affiliate of Brookfield Infrastructure Partners — a related entity.  The new facility was on the same terms and conditions as that with the external lenders.  A commitment fee of 0.875% is payable on any undrawn amounts.

 

In the current financial period Prime Infrastructure acquired a 50% equity interest in the Long Bay Public Private Partnership and 50% in the Melbourne Showgrounds Public Private Partnership.  These investments were acquired from BIP Bermuda Holdings IV Limited, the immediate parent entity of Prime Infrastructure.  The acquisition price of $8,964,615 was paid in Prime Infrastructure Stapled Securities.

 

**(c) PARENT ENTITY**

 

The parent entity in the Group is Prime Infrastructure Holdings Limited.  The immediate parent entity is BIP Bermuda Holdings IV Limited and the ultimate parent is Brookfield Infrastructure Partners L.P (NYSE: BIP, TSX: BIP.UN) which is listed on the New York and Toronto Stock Exchanges.

 

68

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**36. SUBSEQUENT EVENTS**

 

**Refinance of DBCT borrowings:**

 

On 17 February 2011, DBCT Finance Pty Limited, in which Prime Infrastructure group has a 50.1% economic interest, priced US$600.0 million of Guaranteed Senior Secured Notes in the form of a Private Placement (USPP) pursuant to Section 4(2) of the U.S. Securities Act of 1933.  The Notes will be issued in two US$300.0 million tranches.  The first is a 12 year tranche with $298.9 million received on 15 March 2011 and with a bullet maturity on 15 March 2023.  The second is a 9 year tranche with $299.0 million which will be received on 28 April 2011 and with a bullet maturity on 28 April 2020.

 

The proceeds from this USPP issue will be used to repay $287.0 million of current borrowings, pay costs and expenses of the issue, top up the Debt Service Reserve, and repay the $295.0 million of borrowings due to mature in December 2011.

 

Cross currency swaps have been executed with clean swap lines obtained for both the 9 and 12 year tranches.  Fixed to floating swaps have also been executed to ensure DBCT Finance Pty Limited’s current hedging strategy of aligning its debt to the regulatory period is maintained, thereby utilising the natural hedge afforded by the regulatory regime.

 

On 20 January 2011, DBCT Finance Pty Limited executed documentation for an $80.0 million three year NECap bank facility.  On 24 January 2011, an amount of $21.0 million was drawn on this facility with the proceeds used to repay in full the drawn down balance of the existing $40.0 million NECap bank facility (drawn to $21.0 million at 31 December 2010).  The $40 million NECap bank facility was subsequently cancelled.

 

**Transfer of Senior Notes receivable from Myria Holdings Inc.:**

 

On 16 February 2011, Prime NGPL Trust, a wholly-owned subsidiary within the Prime Infrastructure group, transferred its Senior Notes receivable from Myria Holdings Inc. ultimately through to Brookfield Infrastructure L.P (BILP).  The consideration for the Senior Notes from Myria Holdings Inc. was the receipt of a Subordinated Promissory Note granted by BILP under which BILP undertakes to pay the bearer the aggregate amount of US$451.6 million.

 

As part of this transaction the Trusts ultimately paid a distribution out of retained earnings of $15.7 million and a return of capital of $415.9 million to BIP Bermuda Holdings IV Limited.

 

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

 

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

 

For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows:

 
| ** **                               | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|---------------------------------|------------|
| Cash and cash equivalents                |       | 42,596                         |       | 430,752                         |       |
| Cash included as held for sale (note 33) |       | 64,191                         |       | 96,100                          |       |
| ** **                               | ** ** | **106,787**                    | ** ** | **526,852**                     | ** ** |

 

69

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(b) BUSINESSES DISPOSED**

 
| ** **                                          | ** ** | **Consolidated**               | ** ** |
|-----------------------------------------------------|------------|--------------------------------|------------|
| ** **                                          | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| **CONSIDERATION**                                   |       |                           |       |   |   |
| Cash and cash equivalents                           |       | —                         |       | 295,400 |   |
| ** **                                          | ** ** | **—**                     | ** ** | **295,400** | ** ** |
| **Net assets disposed**                             | ** ** | **—**                     | ** ** | **(729,096** | **)** |
| Transfer of reserves                                |       | —                         |       | 79,319 |   |
| Minority interests                                  |       | —                         |       | 45,164 |   |
| Loss on disposal (note 33)                          | ** ** | **—**                     | ** ** | **(309,213** | **)** |
| **Net Cash inflow on disposal of subsidiary:**      | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Consideration received in cash and cash equivalents |       | —                         |       | 295,400 |   |
| Less cash and cash equivalents disposed of          |       | —                         |       | (166,029 | ) |
| ** **                                          | ** ** | **—**                     | ** ** | **129,371** | ** ** |

 

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

 

In the current financial period Prime Infrastructure acquired a 50% equity interest in the Long Bay Public Private Partnership and 50% in the Melbourne Showgrounds Public Private Partnership.  These investments were acquired from BIP Bermuda Holdings IV Limited, the immediate parent entity of Prime Infrastructure.  The acquisition price of $8,964,615 was paid in Prime Infrastructure Stapled Securities.

 

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

 

**(d) FINANCING FACILITIES**

 
| ** **                                          | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
|-----------------------------------------------------|------------|--------------------------------|------------|---------------------------------|------------|
| **FINANCING FACILITIES AVAILABLE TO THE GROUP**     |       |                           |       |                            |       |
| Bank loans and commercial paper/standby   facility: |       |                           |       |                            |       |
| - amount used                                       |       | 971,983                        |       | 1,304,293                       |       |
| - amount unused                                     |       | 448,405                        |       | 395,957                         |       |
| ** **                                          | ** ** | **1,420,388**                  | ** ** | **1,700,250**                   | ** ** |

 

The financing facilities available to the Group disclosed above only relate to the consolidated and continuing entities of the Group.

 

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

 

As disclosed in note 12 to the Financial Statements, the restricted cash can only be used as a reserve for servicing the debt under certain financing arrangements. These restricted cash balances have not been included in the year end cash balances for the purposes of the Statement of Cash Flows.

 

70

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

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

 

**(f) RECONCILIATION OF LOSS FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES**

 
| ** **                                                                                              | ** ** | **Consolidated**                                      | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **Dec 2010********(6 months)   $’000** | ** ** | **June 2010********(12 months)   $’000** | ** ** |
| Loss for the period                                                                                     |       | (79,470                                               | )          | (948,597 | ) |
| Loss on sale or disposal of non-current assets                                                          |       | 55                                                    |       | 1,962 |   |
| (Gain)/loss on disposal of businesses/investments                                                       |       | (11,483                                               | )          | 309,214 |   |
| Movement in fair value through profit or loss on derivatives                                            |       | 25,255                                                |       | (19,303 | ) |
| Share of jointly controlled venture entities’ loss after tax                                       |       | 2,451                                                 |       | 174,667 |   |
| Depreciation, amortisation and impairment of non-current assets                                         |       | 106,401                                               |       | 936,846 |   |
| Amortisation of capitalised borrowing costs                                                             |       | 12,391                                                |       | 17,639 |   |
| Foreign exchange loss                                                                                   |       | 95,497                                                |       | 67,750 |   |
| Unwinding of unrealised discount on intercompany payables                                               |       | (355                                                  | )          | (123 | ) |
| Gain on conversion of BEPPA to Prime Infrastructure Staples Securities                                  |       | —                                                |       | (392,519 | ) |
| Other adjustments                                                                                       |       | (5,334                                                | )          | (51,619 | ) |
| Movement in tax balances                                                                                |       | (28,050                                               | )          | 2,723 |   |
| **CHANGES IN NET ASSETS AND LIABILITIES, NET OF EFFECTS   FROM ACQUISITION AND DISPOSAL OF BUSINESSES** |       |                                                  |       |   |   |
| **(Increase)/decrease in assets:**                                                                      |       |                                                  |       |   |   |
| Current receivables                                                                                     |       | (2,325                                                | )          | (20,854 | ) |
| Current inventories                                                                                     |       | 698                                                   |       | 1,708 |   |
| Other                                                                                                   |       | (8,884                                                | )          | (1,012 | ) |
| **Increase/(decrease) in liabilities:**                                                                 |       |                                                  |       |   |   |
| Current payables                                                                                        |       | (21,803                                               | )          | (34,132 | ) |
| Current provisions                                                                                      |       | (5,222                                                | )          | (1,198 | ) |
| Other liabilities and deferred income                                                                   |       | 14,870                                                |       | (83,658 | ) |
| **Net cash provided by/(used in) operating activities**                                                 | ** ** | **94,692**                                            | ** ** | **(40,506** | **)** |

 

71

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS**

 

**(a) FINANCIAL RISK MANAGEMENT**

 

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

 

·             capital risk

 

·             liquidity risk

 

·             interest rate risk

 

·             foreign currency risk; and

 

·             credit risk.

 

The Board of Prime Infrastructure recognise that risk management is an integral part of good management practice. Risk management is integrated into Prime Infrastructure’s philosophy, practices, business plans and forecasts with a culture of compliance being promoted within the Group.

 

As a result of the merger between Prime Infrastructure and Brookfield Infrastructure that was completed on 8 December 2010, the internal treasury functions of the two entities have been combined.  This has led to increased experience, knowledge and capability within the Group.   The treasury functions also provide services and advice to the corporate head office and also to Prime Infrastructure’s subsidiaries across a broad range of treasury activities that assist with the management of the financial risks relating to the operations of the Group.

 

The treasury function is governed by a Treasury Policy as approved by the Board. The Treasury Management Committee is a committee appointed by the Board made up of key members of Prime Infrastructure and Brookfield Infrastructure’s management team who perform a monitoring, review and approval role, and report to the Board on a regular basis.

 

The Group seeks to minimise the risks associated with foreign currency exchange rates and interest rates primarily through the use of derivative financial instruments to hedge these risk exposures. The use of financial 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 exposure to 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 in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from June 2010.

 

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 19, offset by cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital and accumulated losses as disclosed in notes 25 and 27 respectively.

 

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

 

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

 

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

 

Subsequent to the recapitalisation transaction undertaken in 2009, the Group has recommenced paying distributions. Refer to  note 28 for further information.

 

**Loan covenants**

 

As disclosed within borrowings (note 19), Prime Infrastructure has various loan facilities in place. Most of these facilities have applicable loan covenants attached to these. These are generally in the form of interest cover ratios and gearing ratios.

 

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

 

During the period ended 31 December 2010 and the year ended 30 June 2010; there were no breaches of any loan covenants within the Group.

 

**(c) LIQUIDITY RISK MANAGEMENT**

 

The main objective of liquidity risk management is to ensure that Prime Infrastructure has sufficient funds available to meet its financial obligations, working capital and potential investment expenditure requirements in a timely manner. It is also associated with planning for unforeseen events which may curtail operating cash flows and cause pressure on the Group’s liquidity.

 

72

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 

Prime Infrastructure manages liquidity risk by maintaining adequate cash reserves and committed credit lines in addition to continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Refer to note 37(d) for undrawn facilities that are available to the group as at the reporting date to further reduce liquidity risk.

 

**Liquidity and interest risk tables**

 

The following table details the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

 
| **Consolidated — Dec 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   liabilities   $’000** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------|------------|--------------------------------|------------|---------------------------------|------------|---------------------------------|------------|--------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------|------------|
| **Non-derivative financial liabilities:**               |       |                                                        |       |                                            |       |                           |       |                            |       |                            |       |                           | ** ** | ** **                                             |       |                                             |       |
| Trade and other payables                                |       | —                                                      |       | 125,611                                         |       | —                         |       | 2,628                           |       | 12,248                          |       | —                         | ** ** | **140,487**                                            |       | 140,487                                          |       |
| Interest-bearing liabilities                            |       | 5.04                                                        |       | 14,432                                          |       | 7,503                          |       | 435,800                         |       | 482,335                         |       | 52,016                         | ** ** | **992,086**                                            |       | 971,983                                          |       |
| Other financial liabilities                             |       | 10.10                                                       |       | 47                                              |       | 1,403                          |       | —                          |       | —                          |       | —                         | ** ** | **1,450**                                              |       | 1,380                                            |       |
|                                                    |       |                                                        | ** ** | **140,090**                                     | ** ** | **8,906**                      | ** ** | **438,428**                     | ** ** | **494,583**                     | ** ** | **52,016**                     | ** ** | **1,134,023**                                          | ** ** | **1,113,850**                                    | ** ** |
| **Derivative (assets)/liabilities:**                    |       |                                                        |       |                                            |       |                           |       |                            |       |                            |       |                           | ** ** | ** **                                             |       |                                             |       |
| Net settled interest rate swaps                         |       | —                                                      |       | 10,052                                          |       | 9,353                          |       | 14,719                          |       | 42,494                          |       | 4,944                          | ** ** | **81,562**                                             |       | 78,235                                           |       |
| Net settled foreign currency exchange forward contracts |       | —                                                      |       | (23                                             | )          | —                         |       | —                          |       | —                          |       | —                         | ** ** | **(23**                                                | **)**      | (23                                              | )          |
|                                                    |       |                                                        | ** ** | **10,029**                                      | ** ** | **9,353**                      | ** ** | **14,719**                      | ** ** | **42,494**                      | ** ** | **4,944**                      | ** ** | **81,539**                                             | ** ** | **78,212**                                       | ** ** |

 
| **Consolidated — June 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   liabilities   $’000** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------|------------|--------------------------------|------------|----------------------------|------------|---------------------------------|------------|--------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------|------------|
| **Non-derivative financial liabilities:**               |       |                                                        |       |                                            |       |                           |       |                       |       |                            |       |                           | ** ** | ** **                                             |       |                                             |       |
| Trade and other payables                                |       | —                                                      |       | 160,095                                         |       | —                         |       | —                     |       | 16,223                          |       | —                         | ** ** | **176,318**                                            |       | 176,318                                          |       |
| Interest-bearing liabilities                            |       | 4.32                                                        |       | 25,884                                          |       | 643,956                        |       | 24,258                     |       | 165,626                         |       | 408,054                        | ** ** | **1,267,778**                                          |       | 1,209,451                                        |       |
| Other financial liabilities                             |       | 10.00                                                       |       | 100,398                                         |       | —                         |       | —                     |       | —                          |       | —                         | ** ** | **100,398**                                            |       | 96,689                                           |       |
| ** **                                              |       |                                                        | ** ** | **286,377**                                     | ** ** | **643,956**                    | ** ** | **24,258**                 | ** ** | **181,849**                     | ** ** | **408,054**                    | ** ** | **1,544,494**                                          | ** ** | **1,482,458**                                    | ** ** |
| **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                                           | )          |
| ** **                                              | ** ** | ** **                                                  | ** ** | **11,715**                                      | ** ** | **10,754**                     | ** ** | **16,232**                 | ** ** | **30,004**                      | ** ** | **11,753**                     | ** ** | **80,458**                                             | ** ** | **104,349**                                      | ** ** |

 

73

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

**(d) INTEREST RATE RISK MANAGEMENT**

 

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

 

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

 

·             earnings and distributions are not adversely affected;

 

·             volatility of debt servicing costs is managed within acceptable parameters; and

 

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

 

Having regard to the above constraints and target, Prime Infrastructure’s objective in managing interest rate risk is to minimise interest expense whilst ensuring that an appropriate level of flexibility exists to accommodate potential changes in funding requirements, ownership of assets and also movements in market interest rates.

 

To achieve this, in general terms, Prime Infrastructure’s funding mix comprises both fixed and floating rate debt. Fixed rate debt is achieved either through fixed rate debt funding or through the use of financial derivate instruments. In addition, where possible, interest rate risk is minimised by matching the terms of the interest rate swap contracts hedging the borrowings which fund the underlying investments to the regulatory regime for those investments, thus providing natural hedges.

 

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

 

**Interest rate sensitivity analysis**

 

The sensitivity analysis below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial period and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to KMP and represents management’s assessment of the potential change in interest rates. A parallel shift in the yield curves by 50 basis points higher or lower at reporting date would have the following impact assuming all other variables were held constant:

 
| ** **        | ** ** | **Dec 2010**                      | ** ** | **June 2010**                     | ** ** |
|-------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Consolidated**  | ** ** | **50 bp   increase   $’000** | ** ** | **50 bp   decrease   $’000** | ** ** | **50 bp   increase   $’000** | ** ** | **50 bp   decrease****(1)****$’000** | ** ** |
| Net profit/(loss) |       | —                                 |       | —                                 |       | — |   | — |   |
| Other equity      |       | (27,380                                | )          | (69,716                                | )          | 21,159 |   | (22,919 | ) |

 

----

(1)          In the prior financial period, US Dollar, Euro and Great British pound are based on a 25 point basis downward shift to ensure the rates do not go below zero.

 

**Interest rate swap contracts**

 

Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the applicable benchmark curve at reporting date, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial period.

 

The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts of the Group outstanding as at reporting date:

 
| ** **                                                    | ** ** | **Average contracted   fixed interest rate** | ** ** | **Notional principal amount** | ** ** | **Fair value**            | ** ** |
|---------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------|------------|
| **Outstanding floating   for fixed contracts** | ** ** | **Dec 2010   %**                                       | ** ** | **June 2010   %**                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Less than 1 year                                              |       | —                                                      |       | 6.61                                    |       | —                         |       | 100,000 |   | — |   | (29 | ) |
| 1 to 2 years                                                  |       | 5.12                                                        |       | —                                  |       | 20,000                         |       | — |   | 60 |   | — |   |
| 2 to 5 years                                                  |       | 5.67                                                        |       | 6.23                                    |       | 380,000                        |       | 150,000 |   | (1,416 | ) | (5,284 | ) |
| 5 years plus                                                  |       | 5.46                                                        |       | 5.40                                    |       | 428,967                        |       | 402,726 |   | (46,806 | ) | (67,175 | ) |
| ** **                                                    | ** ** | ** **                                                  | ** ** | ** **                              | ** ** | **828,967**                    | ** ** | **652,726** | ** ** | **(48,162** | **)** | **(72,488** | **)** |

 

74

----

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 

**Interest rate swap contracts (continued)**

 

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

 

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

 

**Inflation Swap Contracts**

 

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

 
| ** **                             | ** ** | **Average contracted   inflation rate indexation** | ** ** | **Notional principal amount** | ** ** | **Fair value**            | ** ** |
|----------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------|------------|
| **Inflation swap contracts** | ** ** | **Dec 2010   %**                                             | ** ** | **June 2010   %**                  | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** | **Dec 2010   $’000** | ** ** | **June 2010   $’000** | ** ** |
| Less than 1 year                       |       | —                                                            |       | —                                  |       | —                         |       | — |   | — |   | — |   |
| 1 to 2 years                           |       | —                                                            |       | —                                  |       | —                         |       | — |   | — |   | — |   |
| 2 to 5 years                           |       | 3.32                                                              |       | 3.32                                    |       | 110,478                        |       | 128,397 |   | (30,072 | ) | (34,695 | ) |
| 5 years plus                           |       | —                                                            |       | —                                  |       | —                         |       | — |   | — |   | — |   |
| ** **                             | ** ** | ** **                                                        | ** ** | ** **                              | ** ** | **110,478**                    | ** ** | **128,297** | ** ** | **(30,072** | **)** | **(34,695** | **)** |

 

**(e) FOREIGN CURRENCY RISK MANAGEMENT**

 

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

 

·             to hedge to reduce uncertainty by establishing appropriate outcomes in domestic currency reporting terms of significant transactional exposures; and

 

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

 

Prime Infrastructure has investments in businesses in a number of international locations and is therefore exposed to foreign currency risk on the distributable cash flows from those businesses. The risk is that the distributable cash flows, which are denominated in the underlying currency of the investments, will lose value relative to the Australian dollar, resulting in less Australian dollars available to pay distributions to Securityholders. This risk is managed through entering forward exchange contracts to convert expected distributions to Australian dollars.

 

75

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 

The tables below set out the Group’s currency exposure at 31 December 2010 and 30 June 2010:

 
| **Consolidated — December   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                         |       | 28,686                                |       | 10,032                            |       | 83                     |       | 91                               |       | 3,704                            |       | 42,596                  |       |
| Trade and other receivables                       |       | 23,047                                |       | 17,796                            |       | 540                    |       | 7,796                            |       | 5,533                            |       | 54,712                  |       |
| Other financial assets                            |       | 34,829                                |       | 23                                |       | —                 |       | —                           |       | —                           |       | 34,852                  |       |
| ** **                                        | ** ** | **86,562**                            | ** ** | **27,851**                        | ** ** | **623**                | ** ** | **7,887**                        | ** ** | **9,237**                        | ** ** | **132,160**             | ** ** |
| **Non-current financial assets:**                 |       |                                  |       |                              |       |                   |       |                             |       |                             |       |                    |       |
| Debt service reserve deposit                      |       | 7,346                                 |       | 19,015                            |       | —                 |       | —                           |       | —                           |       | 26,361                  |       |
| Trade and other receivables                       |       | —                                |       | 4,017                             |       | —                 |       | —                           |       | —                           |       | 4,017                   |       |
| Other financial assets                            |       | 79,699                                |       | —                            |       | 46,930                 |       | 197,856                          |       | 432,305                          |       | 756,790                 |       |
| ** **                                        | ** ** | **87,045**                            | ** ** | **23,032**                        | ** ** | **46,930**             | ** ** | **197,856**                      | ** ** | **432,305**                      | ** ** | **787,168**             | ** ** |
| **Current financial liabilities:**                |       |                                  |       |                              |       |                   |       |                             |       |                             |       |                    |       |
| Trade and other payables                          |       | 70,519                                |       | 51,509                            |       | 2,382                  |       | 1,201                            |       | —                           |       | 125,611                 |       |
| Borrowings                                        |       | —                                |       | 11,884                            |       | —                 |       | —                           |       | —                           |       | 11,884                  |       |
| Other financial liabilities                       |       | 1,380                                 |       | —                            |       | —                 |       | —                           |       | —                           |       | 1,380                   |       |
| ** **                                        | ** ** | **71,899**                            | ** ** | **63,393**                        | ** ** | **2,382**              | ** ** | **1,201**                        | ** ** | **—**                       | ** ** | **138,875**             | ** ** |
| **Non-current financial liabilities:**            |       |                                  |       |                              |       |                   |       |                             |       |                             |       |                    |       |
| Trade and other payables                          |       | —                                |       | —                            |       | 14,876                 |       | —                           |       | —                           |       | 14,876                  |       |
| Borrowings                                        |       | 443,588                               |       | 387,785                           |       | —                 |       | 109,249                          |       | —                           |       | 940,622                 |       |
| Other financial liabilities                       |       | 5,228                                 |       | 76,421                            |       | —                 |       | —                           |       | —                           |       | 81,649                  |       |
| ** **                                        | ** ** | **448,816**                           | ** ** | **464,206**                       | ** ** | **14,876**             | ** ** | **109,249**                      | ** ** | **—**                       | ** ** | **1,037,147**           | ** ** |

 

76

----

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 
| **Consolidated — June 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:**                |       |                                  |       |                              |       |                   |       |                             |       |                             |       |                    |       |
| Debt service reserve 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**             | ** ** |

 

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

 

·             outstanding foreign currency denominated monetary items (excluding foreign exchange derivative contracts) are adjusted at the period end for a 10% change in foreign currency rates at which they are translated; and

 

·             foreign currency derivative contracts are measured as the change in fair value of the derivative as a result of a 10% change in the spot currency rate.

 
| ** **                                      | ** ** | **Impact on income   statement    +/- 10%** | ** ** | **Impact on equity   +/- 10%** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------|------------|
| **Consolidated — Dec 2010** | ** ** | **+ 10%   $’000**                                | ** ** | **- 10%   $’000**                   | ** ** | **+ 10%   $’000** | ** ** | **- 10%   $’000** | ** ** |
| AUD/GBP                                         |       | —                                                     |       | —                                        |       | (2,207 | ) | 2,698 |   |
| AUD/EUR                                         |       | (4,266                                                     | )          | 5,214                                         |       | (2,937 | ) | 3,590 |   |
| AUD/USD                                         |       | (39,300                                                    | )          | 48,034                                        |       | (23,179 | ) | 28,330 |   |
| AUD/NZD                                         |       | (17,987                                                    | )          | 21,984                                        |       | (2,604 | ) | 3,183 |   |

 

77

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

** **

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 
| ** **                                             | ** ** | **Impact on income   statement   +/- 10%** | ** ** | **Impact on equity   +/- 10%** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------|------------|
| **Consolidated — June 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 |   |

 

**Foreign forward exchange contracts**

 

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

 
| ** **          | ** ** | **Average   exchange rate** | ** ** | **Foreign currency** | ** ** | **Contract value**      | ** ** | **Fair value**           | ** ** |
|---------------------|------------|----------------------------------|------------|---------------------------|------------|------------------------------|------------|-------------------------------|------------|
| ** **          | ** ** | **Dec   2010**                   | ** ** | **June   2010**           | ** ** | **Dec   2010   FC’000** | ** ** | **June   2010   FC’000** | ** ** | **Dec   2010   $’000** | ** ** | **June   2010   $’000** | ** ** | **Dec   2010   $’000** | ** ** | **June   2010   $’000** | ** ** |
| **SELL NZ DOLLARS** |       |                             |       |                      |       |                         |       |                          |       |   |   |   |   |   |   |   |   |
| Less than 3 months  |       | —                           |       | $                         | 1.2911     |                         | —     |                          | 2,800      |   | — |   | 2,169 |   | — |   | 116 |   |
| 3 to 6 months       |       | —                           |       | $                         | 1.2589     |                         | —     |                          | 2,000      |   | — |   | 1,589 |   | — |   | (44 | ) |
| 6 to 12 months      |       | —                           |       | $                         | 1.2576     |                         | —     |                          | 5,000      |   | — |   | 3,976 |   | — |   | (116 | ) |
| **SELL GB POUNDS**  |       |                             |       |                      |       |                         |       |                          |       |   |   |   |   |   |   |   |   |
| 3 to 6 months       |       | —                           |       | £                    | 0.4244     |                         | —     |                          | 3,500      |   | — |   | 8,247 |   | — |   | 1,919 |   |
| 6 to 12 months      |       | —                           |       | £                    | 0.4206     |                         | —     |                          | 2,500      |   | — |   | 5,944 |   | — |   | 1,296 |   |
| **SELL US DOLLARS** |       |                             |       |                      |       |                         |       |                          |       |   |   |   |   |   |   |   |   |
| Less than 3 months  |       | —                           |       | $                         | 0.8494     |                         | —     |                          | 7,920      |   | — |   | 9,324 |   | — |   | (85 | ) |
| 3 to 6 months       |       | —                           |       | $                         | 0.8412     |                         | —     |                          | 7,920      |   | — |   | 9,416 |   | — |   | (92 | ) |
| 6 to 12 months      |       | —                           |       | $                         | 0.8252     |                         | —     |                          | 22,500     |   | — |   | 27,265 |   | — |   | (158 | ) |
| 1 year to 2 years   |       | —                           |       | $                         | 0.8082     |                         | —     |                          | 37,790     |   | — |   | 46,759 |   | — |   | (682 | ) |
| 2 years to 3 years  |       | —                           |       | $                         | 0.7558     |                         | —     |                          | 31,232     |   | — |   | 41,322 |   | — |   | 662 |   |
| **BUY GB POUNDS**   |       |                             |       |                      |       |                         |       |                          |       |   |   |   |   |   |   |   |   |
| Less than 3 months  |       | $                                | 0.9825     |                      | —     |                         | 5,624      |                          | —     |   | 5,527 |   | — |   | 13 |   | — |   |
| 3 to 6 months       |       | $                                | 0.9825     |                      | —     |                         | 1,055      |                          | —     |   | 1,037 |   | — |   | 10 |   | — |   |
| ** **          | ** ** | ** **                       | ** ** | ** **                | ** ** | ** **                   | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | **23** | ** ** | **2,816** | ** ** |

 

The table above provides summary quantitative data about exposure to foreign exchange risks at the end of the reporting period that Prime Infrastructure provides internally to KMP.

 

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

 

78

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

** **

**(f) CREDIT RISK MANAGEMENT**

 

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to Prime Infrastructure. The Group only undertakes transactions with credit worthy customers and conducts active ongoing credit evaluation on the financial condition of customers and other trade receivables in order to minimise credit risk.

 

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 of diverse industries and geographical areas.

 

From a treasury perspective, counterparty credit risk is managed through the establishment of authorised counterparty credit limits which ensures Prime Infrastructure only deals with credit worthy counterparties and that counterparty concentration is addressed and the risk of loss is mitigated. Credit limits are sufficiently low to restrict Prime Infrastructure from having credit exposures concentrated with a single counterparty but rather encourages spreading such risks among several parties. The limits are set at levels reflecting Prime Infrastructure’s scale of activity and also allow it to manage treasury business competitively.

 

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

 

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

 

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

 

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

 

·            the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analysis using the applicable yield curve derived from quoted interest rates for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. The fair value of forward exchange contracts is determined using quoted forward exchange market rates and yield curves derived from quoted interest rates matching maturities of the contract.

 

Except as detailed in the following tables, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements of the Group approximates their fair values.

 
| ** **                | ** ** | **Consolidated**                   | ** ** |
|---------------------------|------------|------------------------------------|------------|
| ** **                | ** ** | **Dec 2010**                  | ** ** | **June 2010** | ** ** |
| ** **                | ** ** | **Carrying   amount   $’000** | ** ** | **Fair value   $’000** | ** ** | **Carrying   amount   $’000** | ** ** | **Fair value   $’000** | ** ** |
| **Financial liabilities** |       |                               |       |   |   |   |   |   |   |
| PINNZ SPARCS              |       | —                             |       | — |   | 94,842 |   | 94,765 |   |
| PINNZ secured bonds       |       | 111,685                            |       | 111,127 |   | 119,516 |   | 114,066 |   |

 

79

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the financial period ended 31 December 2010

 

**38. FINANCIAL INSTRUMENTS (CONTINUED)**

 

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

 

**Fair value hierarchy**

 

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

 

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

 

·             Level 2: inputs other than quoted prices included within 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 are not based on observable market data (unobservable inputs).

 
| **Consolidated — Dec 2010** | ** ** | **Level 1********$’000** | ** ** | **Level 2********$’000** | ** ** | **Level 3********$’000** | ** ** | **Total********$’000** | ** ** |
|-------------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|-----------------------------|------------|
| Derivative financial assets                     |       | —                             |       | 3,437                              |       | —                             | ** ** | **3,437**                   | ** ** |
| Derivative financial liabilities                |       | —                             |       | (81,649                            | )          | —                             | ** ** | **(81,649**                 | **)**      |

 
| **Consolidated — June 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 period ended 31 December 2010 and year ended 30 June 2010.

 

**39. ADDITIONAL COMPANY INFORMATION**

 

Prime Infrastructure is a Stapled Security entity. The Company and the Trusts were incorporated in Australia and are operating in Australia, New Zealand, Europe and the United States of America.

 
| **Registered   office**                                                                    | ** ** | **Principal   place of business**                                                          |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|
| ** **                                                                                 | ** ** | ** **                                                                                 |
| Level 22

135 King Street

Sydney, New South Wales 2000

 

Telephone: (02) 9692 2800 |       | Level 22

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 distinct asset classes: Fee for Service and Utilities with geographic coverage on a global basis within OECD countries.

 

80

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INDEPENDENT AUDITORS’ REPORT

 

To the Board of Directors and Stockholders of Prime Infrastructure Holdings Limited, Sydney, Australia

 

We have audited the accompanying consolidated statements of financial position of Prime Infrastructure Holdings Limited (the “Company”) as of December 31, 2010, June 30, 2010 and June 30, 2009, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the six month period ended December 31, 2010 and the years ended June 30, 2010 and June 30, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010, June 30, 2010 and June 30, 2009, and the results of its operations and their cash flows for the six month period ended December 31, 2010 and the years ended June 30, 2010 and June 30, 2009 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

 
| */s/ DELOITTE TOUCHE   TOHMATSU* |   |
|----------------------------------|--------|
|                             |   |
| *DELOITTE TOUCHE TOHMATSU*       |   |

 

*Sydney, Australia*

 

20 April 2011

 

81

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**ITEM 19.   EXHIBITS**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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.                                                                                                                                                                                     |
| 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 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        |       | 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.                                                                                                                                          |
| 4.8        |       | 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.                                                                                                                                                                                              |

 

82

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| **Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.9        |       | Second Amended and Restated Credit Agreement, dated June 21,   2010, 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. as   amended by Amendment No. 1. and Amendment No. 2—incorporated by   reference to Exhibit 4.9 to our Partnership’s Annual Report on Form 20-F   filed April 26, 2011.(1) |
| 4.10       |       | 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.                                                                                                                       |
| 4.11       |       | Amendment dated February 5, 2010 to the Amended and Restated   Limited Partnership Agreement dated as of December 4, 2007, as amended   as of June 13, 2008 and November 16, 2009 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 February 5, 2010.                                                                                           |
| 4.12       |       | Amendment dated February 5, 2010 to the Second Amended and   Restated Limited Partnership Agreement dated as of December 4, 2007, as   amended as of June 13, 2008 and November 16, 2009 of Brookfield   Infrastructure L.P.—incorporated by reference to Exhibit 99.1   to our Partnership’s Report of Foreign Private Issuer on Form 6-K   filed February 5, 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.                                                                                                                                                                                                                                                                                           |
| 15.1       |       | Consent of Deloitte & Touche LLP relating to the   incorporation of the consolidated and combined financial statements of   Brookfield Infrastructure Partners L.P. into the Annual Report on   Form 20-F—incorporated by reference to Exhibit 15.1 to our   Partnership’s Annual Report on Form 20-F filed April 26, 2011.                                                                                                                                       |
| 15.2       |       | Consent of Deloitte Touche Tohmatsu relating to the incorporation of   the consolidated and combined financial statements of Brookfield Infrastructure   Partners L.P. into this Annual Report on Form 20-F/A.                                                                                                                                                                                                                                                                                                     |

 

----

*(1)          Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.*

 

83

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**SIGNATURE**

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign 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/   Lou Maroun |
|                            |                                                  |   | Name:   Lou Maroun |
|                            |                                                  |   | Title:   Director |
|                            |                                                  |   |   |
|                            |                                                  |   |   |
| Dated:   May 11, 2011 |                                                  |   |   |

 

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