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Contact To Postpone Decision On New Power Station

2 May 2002

Contact To Postpone Decision On New Power Station Development

Contact Energy Ltd today announced that it has postponed a decision on the development of a new 400 MW gas-fired power station at its Otahuhu site.

“Contact is very firmly of the view that a major new increment of generation capacity will be required in the near term, and we would very much like to be the party that builds the new generation plant,” said Contact’s chief executive and managing director, Steve Barrett.

“However, there are a number of outstanding areas of uncertainty that mean Contact is not prepared to commit shareholders’ funds to a new investment of this magnitude at this time.”

The key issues of concern for Contact are:

- delay in securing consent for the Otahuhu project. While Contact is confident of resolving an outstanding appeal to its consent, hearings have been delayed until later this month;

- ensuring we have sufficient gas supplies to make a new gas-fired power station viable;

- clarifying the transmission regime to apply to new gas supplies;

- further evaluation of the economics of the project;

- clarification of some uncertainties over the future electricity market institutions.

“If we can be sure that these issues can be resolved in a way which gives Contact confidence that the project will deliver an appropriate return on capital, and that risks can be properly addressed, activities can be scheduled to deliver the project in an appropriate timeframe,” said Mr Barrett.

“We are particularly concerned about the gas availability and regulatory issues. Recent proposals, such as mandatory hedge tendering, could seriously compromise any investor’s capacity to earn an appropriate return on capital from new plant.”

Ends


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