Reports and Publications

• Annual Report 2006
  • Contents
  • Part 1 Overview
  • Part 2: Statement of responsibility and audit report
  • Part 3: Departmental financial statements
  • Part 4: Non-departmental schedules
  • Part 5: Other information

Within this section

Output Class - Management of equipment procurement (continued)

1. Acquisition of new maritime forces vessels

2. Acquisition of medium range anti armour weapon

3. Acquisition of direct fire support weapon (area)

4. Upgrade and refurbishment of C-130H aircraft

5. Upgrade of P-3K Orion mission systems

6. Replacement of Boeing 727 aircraft

Annual Report for the year ended 30 June 2006

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Part 3: Departmental financial statements (continued)

Output Class - Management of equipment procurement

It will continue management of the following projects:

1. Acquisition of new maritime forces vessels for the Royal New Zealand Navy This project is for the acquisition of a multi role vessel (MRV), two offshore patrol vessels (OPV) and four inshore patrol vessels (IPV) to meet inshore and offshore requirements for maritime surface surveillance in New Zealand's Exclusive Economic Zone in the South Pacific. The multi role vessel, in addition to carrying out patrol duties, will provide tactical sealift for the New Zealand Defence Force, support disaster relief and peace support operations, provide diplomatic and military presence, and provide training. The vessels are forecast to enter service by 2008.
Target	Delivered
The project milestones in 2005/06 are to: complete all design activity on all three vessel types	Detailed design reviews have been held in accordance with the programme. All reviews have been completed other than the final review of the MRV and Ship to Shore Transfer which will be conducted after the MRV arrives in Melbourne.
progress the MRV build from initial keel lay to launch in preparation for fit out	The MRV (to be named HMNZS Canterbury), was launched on 11 February 2006, and is scheduled to undertake sea trials in July 2006 and depart Rotterdam for Melbourne in August 2006. Fit out of the gun and military communications, along with crew training, will occur between October and December 2006. Delivery of the MRV is planned for January 2007. Both Landing Craft (LCMs) were launched in April, completed sea trials in May and will be embarked in the MRV for delivery in Melbourne in October 2006.
commence the build of both OPVs	The keel lay of OPV1 (to be named HMNZS Otago) occurred on 16 December 2005 with launch scheduled for 18 November 2006. At 30 June 2006, construction of OPV1 was approximately 50% complete and OPV2 (to be named HMNZS Wellington) about 10% complete. Six modules for OPV2 are being constructed in the Netherlands for transport to Melbourne on the MRV.
commence the build of the first two IPVs.	Keel lay for IPV1 (to be named HMNZS Rotoiti ) occurred on 10 March 2006. At 30 June 2006, construction of IPV1 was 40% complete with launch scheduled for January 2007. IPV2 (to be named HMNZS Hāwea ) was 10% complete and steel had been cut for IPV3 (to be named HMNZS Pūkaki ). All IPVs are scheduled for delivery in 2007 with IPV4 (to be named HMNZS Taupō ) expected in December 2007.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	499,724,161
Foreign exchange variances to date and forecast to complete	(3,358,032)
GST	62,466,000
Total approved cost	558,832,129
GST exclusive
Expenditure to 30 June 2005	114,034,511
Expenditure 2005/06	152,024,097
Future commitments and forecasts	230,306,265
	496,364,873
GST
GST to 30 June 2005	1,976,000
Expenditure 2005/06	4,475,836
Future commitments and forecasts	56,014,162
	62,465,998
Total forecast cost to complete	558,830,871

• Foreign exchange variances at 30 June 2006 are favourable by $3.358 million due to the purchase rates for foreign currencies being better than the exchange rates used in the Cabinet paper for financial approval.

	Approval Rate	Forecast Average Rate
AUD	0.8821	0.8979
CAD	0.8210	0.8471
EUR	0.5059	0.5085
GBP	0.3464	0.3455
JPY	65.5436	70.9001
NOK	4.2444	4.3357
SEK	4.6683	4.8496
USD	0.6215	0.6496

• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 were:

AUD	0.8965
CAD	0.8339
EUR	0.4906
GBP	0.3444
JPY	70.9000
NOK	4.2192
SEK	4.8496
USD	0.6477

2. Acquisition of medium range anti-armour weapon for the New Zealand Army This weapon will provide land forces with a medium range capability against armoured vehicles and other targets.
Target	Delivered
Deliveries are scheduled to be completed in the second half of 2006.	On-going technical support being negotiated. The Javelin system was delivered in June 2006, except for the missiles. The missile delivery date will be advised by the United States Government in September 2006.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	23,856,000
Foreign exchange variances to date and forecast to complete	(2,019,747)
GST	2,982,000
Total approved cost	24,818,253
GST exclusive
Expenditure to 30 June 2005	11,220,443
Expenditure 2005/06	5,248,473
Future commitments and forecasts	5,367,337
	21,836,253
GST
GST to 30 June 2005	125
Expenditure 2005/06	838,185
Future commitments and forecasts	2,143,690
	2,982,000
Total forecast cost to complete	24,818,253

• Foreign exchange variances at 30 June 2006 are favourable by $2.020 million due to the purchase rates of the USD currency being better than the USD exchange rates used in the Cabinet paper for financial approval.
  
  USD approval rate = 0.5841
  USD forecast average rate = 0.6498
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was USD = 0.6477.

3. Acquisition of very low level air defence system for the New Zealand Army This project will purchase an alerting and cueing system to bring the Army's Mistral air defence system up to an improved operational standard.
Target	Delivered
Deliveries are scheduled to be completed in the second half of 2006.	Transport aircraft availability and small schedule slippage will see delivery being achieved in October 2006.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	13,728,376
Foreign exchange variances to date and forecast to complete	490,511
GST	1,716,047
Total approved cost	15,934,934
GST exclusive
Expenditure to 30 June 2005	3,768,237
Expenditure 2005/06	3,402,285
Future commitments and forecasts	7,048,365
	14,218,887
GST
GST to 30 June 2005	8,729
Expenditure 2005/06	4,259
Future commitments and forecasts	1,703,058
	1,716,046
Total forecast cost to complete	15,934,933

• Foreign exchange variances at 30 June 2006 are unfavourable by $0.491 million due to the purchase rates of the USD currency being worse than the USD exchange rates used in the Cabinet paper for financial approval.
  
  EUR approval rate = 0.5187
  EUR forecast average rate = 0.4999
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was EUR = 0.4906.

4. Upgrade and refurbishment of C-130H aircraft for the Royal New Zealand Air Force This project will extend the life of the Royal New Zealand Air Force C-130H Hercules aircraft by upgrading the aircraft systems and undertaking some structural refurbishment work. The first aircraft will be completed in 2007 with the final aircraft completed in 2010.
Target	Delivered
The project milestones in 2005/06 are to: complete all design activity for aircraft upgrade commence work on the modification of the prototype aircraft.	The majority of the design effort has been completed. The induction of aircraft number one into the upgrade and refurbishment programme achieved in October 2005. Work is progressing as planned on the removal of redundant systems and structural components requiring replacement. The contractor is now receiving parts and equipment into store as planned.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	233,739,000
Foreign exchange variances to date and forecast to complete	(1,582,072)
GST	29,217,000
Total approved cost	261,373,928
GST exclusive
Expenditure to 30 June 2005	43,962,237
Expenditure 2005/06	65,889,248
Future commitments and forecasts	121,631,500
	231,482,985
GST
GST to 30 June 2005	6,100
Expenditure 2005/06	104,075
Future commitments and forecasts	29,106,825
	29,217,000
Total forecast cost to complete	260,699,985

• Foreign exchange variances at 30 June 2006 are favourable by $1.582 million due to the purchase rates of the CAD currency being better than the CAD exchange rates used in the Cabinet paper for financial approval. The USD rate is slightly unfavourable
  
  CAD approval rate = 0.7857
  CAD forecast average rate = 0.8390
  
  

  USD approval rate = 0.6748
  USD forecast average rate = 0.6677

• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rates used to calculate commitments and forecasts at 30 June 2006 was CAD = 0.8339 and USD = 0.6477

5. Upgrade of P-3K Orion mission systems for the Royal New Zealand Air Force This project will upgrade the sensors and mission management systems required for the Royal New Zealand Air Force's P-3K Orion maritime patrol aircraft to conduct surface surveillance tasks. The first aircraft will be completed in 2008 with the final aircraft completed in 2010.
Target	Delivered
The project milestones in 2005/06 are to: complete an interim installation of the electro-optics system on three aircraft commence work on the full modification for the first aircraft in Greenville, Texas complete all detailed design work for the upgrade.	Installation of interim electro-optics on the three aircraft, which were being fitted with the system, has been completed. Design reviews for the main upgrade equipment suite, structural design and software has been essentially completed. Prototype aircraft positioned with contractor in the United States and removal of redundant systems underway. Contractor now receiving parts and equipment into store.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	373,069,314
Foreign exchange variances to date and forecast to complete	(25,739,590)
GST	46,633,667
Total approved cost	393,963,391
GST exclusive
Expenditure to 30 June 2005	65,617,789
Expenditure 2005/06	110,719,174
Future commitments and forecasts	170,908,326
	347,245,289
GST
GST to 30 June 2005	325,148
Expenditure 2005/06	892,358
Future commitments and forecasts	45,416,145
	46,633,651
Total forecast cost to complete	393,878,940

• Foreign exchange variances at 30 June 2006 are favourable by $25.740 million due to the purchase rates of the USD currency being better than the USD exchange rates used in the Cabinet paper for financial approval.
  
  USD approval rate = 0.6107
  USD forecast average rate = 0.6624
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was USD = 0.6477.

6. Boeing 757 Acquisition/Modification for the Royal New Zealand Air Force This project replaces the Boeing 727 aircraft with Boeing 757 aircraft to provide greater range and payload capacity. Two aircraft have been purchased and are being operated by the Royal New Zealand Air Force in a passenger configuration. The intention is to modify them to provide a dual passenger/freight capability. A contract for this conversion was signed in October 2005. The first aircraft will be completed in 2007 with the final aircraft completed in 2010.
Target	Delivered
The project milestones in 2005/06 are to: have the modification programme engineering design phase completed and accepted	Contract documents were signed on 10 October 2005. Preliminary Design Reviews have been undertaken with the final review scheduled for September 2006.
induct the first aircraft into the contractor's facility for modification.	Aircraft induction will be delayed until early 2007 owing to more extensive design effort required and longer lead times in some items of equipment.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	220,603,771
Foreign exchange variances to date and forecast to complete	316,721
GST	27,575,375
Total approved cost	248,495,867
GST exclusive
Expenditure to 30 June 2005	108,470,231
Expenditure 2005/06	35,127,622
Future commitments and forecasts	77,322,029
	220,919,882
GST
GST to 30 June 2005	13,055,092
Expenditure 2005/06	45,449
Future commitments and forecasts	14,474,834
	27,575,375
Total forecast cost to complete	248,495,257

• Foreign exchange variances at 30 June 2006 are unfavourable by $0.317 million due to the purchase rates of the USD currency being worse than the USD exchange rates used in the Cabinet paper for financial approval.
  
  USD approval rate = 0.6093
  USD forecast average rate = 0.6084
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was USD = 0.6477.

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