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NGC to Exit Electricity Retailing

25 July 2001

NEWS MEDIA RELEASE

NGC to Exit Electricity Retailing and Enters Alliance

Natural Gas Corporation Holdings Limited (NGC) has reached an agreement to sell its 290,000 North Island commercial and residential electricity customers to Genesis Energy. The agreement will take effect from 1 August 2001, after satisfaction of certain conditions. This agreement, following the recent sale of South Island customers to Meridian Energy, means that NGC, operating under the On energy brand, is withdrawing from the electricity retailing market.

The sale will close off NGC’s retail exposure to the wholesale electricity market. Managing Director, Mr John Barton, declined to disclose the value of the transaction. However, Mr Barton affirmed he did not expect the sale would result in any further write down of NGC’s assets. While exiting the electricity retail market, NGC was retaining the majority of the businesses acquired from TransAlta New Zealand last year, he said.

NGC will retain its electricity generation assets and its natural gas customer base of approximately 100,000 industrial, commercial and residential gas users throughout the North Island. NGC will also retain its meter business and, as part of the sale, NGC will acquire Genesis’ electricity meters and provide meter services to Genesis for its residential electricity customers.

A strategic marketing alliance is being formed with Genesis to offer dual fuel and joint promotions to the retail market, under the Genesis brand, for gas and electricity products to existing and new customers. NGC will continue to provide full customer support services for large industrial gas customers.

“We believe that the core gas business of gas transmission, distribution, wholesaling, and sales to industrial customers, combined with the electricity generation and the strategic alliance for gas retail, creates a very sound business for NGC going forwards,” said Mr Barton

Mr Barton said today outstanding progress had been made by On energy to improve customer service since NGC formally took over the electricity retail business last year and it was disappointing to be exiting the business. However, the way the hedge market and spot markets are functioning meant the risks for a net retailer were unacceptable

He said a basic intention of the electricity market development was to encourage retail competition. This was not being achieved. Mr Barton said NGC had decided to exit electricity retailing because it was not confident that the wholesale electricity market provides an environment, now or in the future, for net retailers to compete effectively.

Notwithstanding the sale, consultation and retail advisory arrangements with the Hutt Mana Energy Trust will continue.

There will be a transition period of several months during which NGC will provide Genesis with transitional call centre, billing and credit services. Customers are not required to do anything at this point and will be kept fully informed during the transition process.

ENDS

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