This is Letter-1

The Trustees

HBPCT

Ownership Review, Unison Networks Limited

In my view the HBPCT adds no value to Unison, and when I read the most recent annual report I cannot see that it adds any value or benefit to the Beneficiaries either.

The Trust was NOT established with a purpose of holding the assets of Unison Networks in perpetuity. If it had been, the trust deed would have mandated that. In fact, the reverse is clear, with the mandated reviews every 5 years and the opportunity to distribute the shares to the Beneficiaries.

There is no better time than right now to act for the benefit of the Beneficiaries. All Hawke's Bay consumers/Beneficiaries have been impacted by the cyclone and many are in desperate need of financial support. Owning the shares directly gives us all a new, and better option: the option of continuing to own our shares and receive future dividends, or to sell the shares for a significant cash settlement. Of course Unison must apply to list on the NZX but this is a simple and inexpensive procedure.

The shares in Unison should be distributed to the beneficiaries now, as provided for in Rule 4.4 (c) of the Trust Deed.

Yours sincerely,

This button will open an email which is pre-addressed to the HBPCT@bwr.co.nz, and automatically paste this letter-1 into the email, ready to send.

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Add your own name, and your ICP number if you have it.

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Thank you for supporting the Free the Funds movement.

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This is Letter-2

The Trustees

HBPCT

Ownership Review, Unison Networks Limited

1. The Trust Deed itself clearly envisages and authorises the option of distributing the shares in Unison Networks to the Beneficiaries. The Trust was NOT established with a purpose of holding the assets of Unison Networks in perpetuity. If it had been, the trust deed would have mandated that. In fact, the reverse is clear, identifying alternative ownership options in Rule 4, and mandating a regular review procedure.

2. A recent legal opinion relating to a very similar Trust makes a number of fundamentally important statements, including . .

• “When exercising trustee powers, trustees must act in accordance with their fiduciary duties. The carrying out of that action must be for a proper purpose and for the benefit of beneficiaries. This is key amongst the mandatory and default duties imposed upon trustees. Failing that, the act will be outside their powers, and amount to a breach of Trust”.

3. An author of the original Trust Deed, a prominent lawyer in Hawkes Bay, made a very interesting submission to the 2018 "Ownership Review". He stated . . .

• "There is a lamentable lack of understanding of the distinction between consumers and community. It is important that the Trustees emphasise and clarify that the sole beneficiaries of the Trust are consumers connected to the HB network of UNL, and that the terms of the Trust Deed clearly require the distribution of shares directly to the "consumers of the day" and for no other purpose. The Trustees of HBPCT have a fiduciary duty to uphold and comply with the specific provisions of the Trust Deed”.

Surely the current Trustees ought to understand this.

4. The Trustees, considering alternative ownership options for Unison Networks and its business, MUST consider a variety of factors such as:

• The market value of the whole of the Unison Networks business;

• The value of the parcel of shares to be distributed to the Beneficiaries;

• The future value of the whole of the Unison Networks business and the likely dividends should ownership remain with the Trust.

5. Where is the discussion and the detail around these issues of “value” which the Trustees must consider, and ought to disclose to the Beneficiaries?

6. There are express engagement obligations imposed on the Trustees with respect to the Trust Beneficiaries. A core duty incumbent on trustees of any trust is to act for the benefit of the beneficiaries of that trust, in accordance with the terms of the trust itself. A trustee cannot fulfil these duties properly if he or she does not have a proper understanding of the wishes of the Beneficiaries in respect of the proposed alternatives.

7. The so-called “independent” reports are totally focussed on what is best for Unison. That is NOT the Trustees concern. How do the Trustees show that continuing the current ownership model is of greater benefit to the Beneficiaries?

8. There is no better time than right now to act for the benefit of the Beneficiaries. All Hawke's Bay consumers/Beneficiaries have been impacted by the cyclone and many are in desperate need of financial support. Owning the shares directly gives us all a new, and better option: the option of continuing to own our shares and receive future dividends, or to sell the shares after Unison Networks lists on the NZX, for a sum that would substantially exceed the accumulated value of dividend payments for many years into the future.

9. The Trust was established in 1993. Since that time it has carried out 5 “Ownership Reviews”, all resulting in a decision to maintain the status quo. But, the Trust must terminate, as mandated by the Trust Deed, and the Trust wound up on or before 1 January 2072. That means another 9 “Ownership Reviews” might be possible before the mandated Termination date. What event or environment would cause the Trustees to make the decision to distribute the shares that would be likely to be more beneficial to the Beneficiaries today, than the current need and benefit to Hawkes Bay, following the cyclone in February of this year?

10. It is easy to demonstrate the likely value of the parcel of shares that each Beneficiary would receive. Unison’ financial reports quote the total shareholder funds at $509M. That translates to $8,300 for each beneficiary. Unison’s market value is very possibly a deal more than that, and a sensible estimate is $12,000.

11. If the Trustees know and understand the value of the shares, but fail to act for the Beneficiaries, and disclose that information during the course of an “ownership review”, then that would be a serious omission and the Trustees would be in breach of trust.

12. The PwC comments about the costs of listing on the NZX are entirely irrelevant, and have been mis-interpreted in recent Trustee statements. Initial listing fees for a company the size of Unison would be about $350,000. The PwC comments relate to companies seeking an initial public offering, an IPO, which is absolutely not the case when distributing shares to Beneficiaries.

13. Is Unison actually performing well under the Trust “ownership”? With PwC showing Unison Network Limited has a compounding average growth rate of NEGATIVE 2.2%, the answer surely is NO!

14. The PwC report highlights the need for about $100 million additional capital expenditure, each year, for the next 10 years. That money can only come from additional borrowing, or from selling assets, and under Trust ownership . . . “Unison may not be able to maintain its dividend flow to the Trust”.

15. The Trust is NOT a “Community” Trust. The concept of “intergenerational” does NOT exist in the Trust Deed. It is a construct created by the Trustees in order to argue for the “status quo”. The fact that the Trust Deed provides for the Trust to terminate and be wound up at any of the 5 yearly “ownership reviews”, and if not before, then certainly on 1 January 2072, confirms this.

16. Considering the report prepared by Unison Directors, and the lack of a proper analysis of the factors listed in 4 above, I believe that the shares in Unison should be distributed to the beneficiaries, as provided for in Rule 4.4 (c) of the Trust Deed.

Yours sincerely,

This button will open an email which is pre-addressed to the HBPCT@bwr.co.nz, and automatically paste this letter-2 into the email, ready to send.

You can edit the email as you choose to emphasise your own viewpoint.

Add your own name, and your ICP number if you have it.

Then, send the email.

Thank you for supporting the Free the Funds movement.

If all else fails, just create an email in your normal manner, and copy any of the text you like.

This is our Submission to The Trustees

The Trustees

HB Power Consumers Trust

hbpct@bwr.co.nz

Submission to the “Ownership Review”

Trustees,

I am making this submission on behalf of the Supporters of the Free the Funds movement. I hasten to add, I am not representing the personal views of the many supporters. It would be presumptuous of me to do so. I am merely collating data relating to the registrations of interest that the Free the Funds movement has collected in the past few months since its inception, and presenting the collective view that our Supporters well understand.

The Supporters of the Free the Funds movement who wish to do so will make their own submissions to this review. However, we know that many will not, and for their own reasons. We know that the Supporters represent a wide cross-section of Consumers/Beneficiaries of the HBPCT. Many of these people are reluctant to attach their names to anything, many are afraid of making a submission, many fear they do not have the resources or skills to write a submission, and the lack of information from the Trust relating to options that might be available makes it exceedingly difficult for some to even create a viewpoint.

The Free the Funds movement has always been very clear about its Mission and Vision. This has helped people to understand that there is a real alternative to Trust ownership of Unison, and for them to register their interest in the alternative proposition.

Our mission is to ensure that the ownership of Unison is switched from HBPCT, in accordance with the Trust Deed, to direct ownership of the shares in Unison by all eligible consumers.

Our vision is to see that all consumers represented by the HBPCT become shareholders of Unison in their own right, through the free distribution of shares.

The Free the Funds movement has recorded, to date, a number approaching 400 Supporters.

On behalf of the registered Supporters, I ask you to recognise that these people have a valid point of view and understand the proposition that Consumers/Beneficiaries are perfectly capable of owning and managing their share entitlement and making their own decisions with respect to these shares. We have valid email addresses for all our Supporters. Many, but not all, have provided their ICP number.

Many of these Supporters, and many other Consumers/Beneficiaries, have been dramatically affected by the February cyclone. Allowing Consumers/Beneficiaries the opportunity to capitalise on their shareholding is perfectly valid, and for many it would be a salvation.

Trust Information

The Trustees have been virtually silent on the ownership options that are available for Unison. The PwC report does not help in that regard. The PwC report is superficial, provides no valuation information, and canvasses a variety of ownership options that are not available to Unison at the present time.

The deafening silence does not help Consumer/Beneficiaries establish a viewpoint. Occasional statements from the Trust chair have been inaccurate interpretations of the Trust Deed, and dismissive of information that the Trustees are obligated to provide to Consumers/Beneficiaries if they are to properly carry out their fiduciary duty as Trustees. Where is their integrity? Where are the discussions and valuations relating to alternative options available to the Consumer/Beneficiaries?

The valuations we have indicated to Supporters are real. The Trust secretary offered a view which is in line with our own calculations. Our valuations have been confirmed by independent sources, including long-standing electricity industry executives.

The PwC Report

Our first observation after reading the PwC report, and the associated Directors report, is that the entire focus of both reports is on the question: “what is best for Unison”. The second observation is that there is an undeniable bias towards the Directors preferred outcome: “retain Trust ownership”.

The PwC report compares the performance of Unison against other lines/network companies. By most measures there is very little difference between the performance of Unison and the other companies examined. It is fundamentally important to understand that the selection of the five other companies, all monopolies, are variously owned by community groups and Councils, or Trusts, or by offshore companies. All have their prices and quality performance regulated by the Commerce Commission. In fact there is no distinction in their performance. Trust ownership conveys no performance advantage.

Is Unison actually performing well under the Trust “ownership”? Here are two “highlights” in the PwC report:

- Unison Group EBITDA growth of 0.5% reflects a compounding growth rate of 0.1% p.a.

- Unison Networks EBITDA over the review period had a compounding average growth rate of negative 2.2%.

Is that a reflection of a good performance, under Trust ownership? With a NEGATIVE growth rate? We don’t think so.

What is fundamentally important is the statement by PwC on the need for significant capital investment in Unison over the next 10 or more years, and their warning which follows . .

“The next decade will require significant investment by Unison in electricity network infrastructure which will need to be funded by a combination of regulated revenue recovered from customers and other sources of funds, including borrowing. This is relevant to the ownership review as Unison’s current shareholders, the HBPCT, cannot provide additional capital. If Unison is cash constrained, it may not be able to maintain its dividend flow to the Trust”.

PwCs comments relating to “inter-generational” aspects are thoroughly disingenuous. The Trust Deed is not a deed in perpetuity as it could terminate at any of the 5 yearly reviews. Consumers [Beneficiaries] are clearly defined in the Deed as those customers connected to the Unison network . . “at any appropriate date designated by the Trustees from time to time”.

The PwC report makes it abundantly clear that Trust ownership adds no value to Unison. Unison is much more likely to perform better with independent Directors, and real shareholders who are able to continually hold them responsible for operational and overall performance in the regulated environment in which they operate. In doing so Unison also gains the ability to raise capital for future development thus improving the outlook for shareholder value.

The Proposal

Clearly the Trust adds no value for the Consumer/Beneficiaries. Accordingly, the Free the Funds Supporters wish to have all the shares in Unison distributed to the Consumers/Beneficiaries, to own and manage in their own right

Yours faithfully,