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TrustPower Quarterly Result and Chairman's Address

The TrustrPower AGM was held 29 July 2004 at 2.30pm at Burretta Park, Tauranga.

The following are transcripts of the Chairman's address, and TrustPower's Quarterly Result Anoouncement.

Chairman's Address

TrustPower Limited Annual Meeting

29 July 2004

It is pleasing to report a 32 per cent increase in audited after tax surplus to $61.9 million for the year to 31 March 2004.

I have advised shareholders on a number of occasions over the last two years of TrustPower's improved risk management processes.

This result demonstrates TrustPower's ability to operate profitably during periods of higher wholesale electricity prices through prudent management of its hedge positions and optimisation of its own hydro and wind generation capacity.

As part of the Company's renewed focus on risk, a decision was made early in the 2004 financial year, and reported at last year's annual meeting, to withdraw from the Auckland, Wellington and Christchurch residential markets.

As a result of this initiative customer numbers subsequently reduced from 274,000 to 224,000 at the end of March 2004. However, over the last quarter customer numbers have stabilised and were at 226,000 at the end of June.

The Directors are satisfied that the refocused retail strategy has produced a stronger financial performance at a lower level of risk for the company and that the way forward will be to retain existing customers by providing better service levels than those offered by competitors.

During the 2004 financial year, the lower than average rainfall across the country resulted in TrustPower's own generation performing slightly below expectation at 1738 GWh including a full year's production from the Cobb Hydro Scheme acquired in March 2003.

The lower than expected volume from the Company's generation portfolio was offset by slightly higher prices.

As outlined in the Annual Report, TrustPower completed a revaluation of its generation assets as at 31 March 2004, resulting in an increase of $421.5 million in the value of generation assets.

The increase in value reflects the higher earning potential of TrustPower's renewable generation portfolio in a market which will be affected by higher prices for new contracted gas post the rundown of Maui.

TrustPower retains a strong balance sheet with total assets of close to $1.4 billion and shareholders funds of $866 million as at 31 March 2004.

During February 2004 TrustPower successfully completed a further issue of Series 2014 bonds which provided long term funding for $54.7 million.

TrustPower continues to evaluate a number of renewable energy projects, the key ones being: " 70.5 MW Wairau Valley hydro scheme in Marlborough. " 60 MW Dobson hydro scheme on the West Coast. " 132 MW South Australian wind projects at Myponga and Snowtown.

Whilst it would be pleasing to add further generation projects to the TrustPower asset base, it can be taken as read that such projects will not be progressed unless there is confidence that earnings from the sale of electricity will provide adequate returns for the investment risks in the sector.

Addressing firstly costs. The lead times for hydro projects cannot be underestimated and TrustPower will be watching with interest the outcomes of the recently announced review of the Resource Management Act. The industry also needs a high level of certainty that, once granted through proper process, water rights will be firm for the period of the water right, with ideally some bounds on subsequent changes over the full operating life of the investment.

New Zealand is perhaps 80% through the painful period of readjusting to a higher cost base in the gas sector and the flow on of this into electricity prices. TrustPower believes there is little choice but to complete the last part of this process allowing the market to function with power prices that support new power station investment.

Finally, it is undeniable that climate change and greenhouse gas issues will influence the New Zealand energy sector. TrustPower urges Government to move to bring certainty to the proposed carbon tax policy in a timely way to ensure investment choices recognise emissions costs.

Now to return to our financial performance. Shareholders will be aware that TrustPower will pay a final dividend of 9.0 cents per share, fully imputed, tomorrow. Together with the interim dividend, adjusted for the recent share split of 8.5 cents per share this provides a total payout relating to the 2004 financial year of 17.5 cents per share representing growth of 17 per cent on the 2003 year.

Additionally, shareholders also received a special dividend of 5.0 cents per share adjusted for the share split which was paid on 2 April 2004.

In terms of up-to-date performance I am pleased to announce an unaudited after tax surplus for the three months to 30 June 2004 of $15.7 million, compared with $17.2 million for the same period last year.

Increases in interest costs of $2.1 million due to higher debt levels and depreciation of $1.4 million due to higher asset base following the recent revaluation of generation assets contributed to the lower surplus.

This quarter's results were ahead of budget expectation. Earnings before Interest, Tax, Depreciation and Amortisation were $39.8 million versus $37.6 million for the same period last year.

The first quarter trading environment was very different to the first quarter last year, in particular, lake storage levels and inflows have been above average and spot electricity prices accordingly have been significantly lower compared with the prior year when spot prices were high due to lower hydro storage levels. (The load weighted average price for the quarter was $43 MWh versus $140 MWh in the first quarter 2003.)

TrustPower's own generation assets produced 480 GWh during the first quarter versus 430 GWh in the first quarter of 2003.

All of TrustPower's hydro generation storage catchments remain at historically high levels leaving the Company well positioned to meet customer demand over the remainder of the 2005 financial year.

The Company's balance sheet remains strong and is similar to the 2004 financial year end position. Debt to debt plus equity was 31.2 per cent as at 30 June 2004 compared with 44.5 per cent at the same time last year. Again, the revaluation of generation assets, previously discussed, is the main driver of this reduction in gearing.

At this early stage of the financial year it is difficult to predict year end results, however, the first quarter result is pleasing and reflects TrustPower's ability to manage wholesale market risks in both high and low price periods. At this stage the Directors are confident that another good result for the full year is achievable.

Harold Tiller - Chairman

Media Statement

Thursday, 29 July 2004

TrustPower Limited Quarterly Result Three Months Ending 30 June 2004

The Directors are pleased to announce an unaudited after tax surplus for the three months to 30 June 2004 of $15.7 million, compared with $17.2 million for the same period last year. Increases in interest costs of $2.1 million due to higher debt levels and depreciation of $1.4 million largely due to a higher asset base following the recent revaluation of generation assets contributed to the lower surplus. This quarter's results were ahead of budget expectation.

Earnings before Interest, Tax, Deprecation and Amortisation ("EBITDA") were $39.8 million versus $37.6 million for the same period last year.

The first quarter trading environment was very different to the first quarter last year, in particular, lake storage levels and inflows have been above average and spot electricity prices accordingly have been significantly lower compared with the prior year when spot prices were high due to lower hydro storage levels. (Load weighted average price for the quarter was $43 per MWh versus $140 per MWh in the first quarter 2003.)

TrustPower's own generation assets produced 480 GWh during the first quarter versus 430 GWh in the first quarter of 2003.

All of TrustPower's hydro generation storage catchments remain at historically high levels leaving the Company well positioned to meet customer demand over the remainder of the 2005 financial year.

Customer numbers have risen slightly to 226,000 as at end of June 2004 from the level advised for the 2004 financial year end result of 224,000.

The Company's balance sheet remains strong with relatively minor movement from the 2004 financial year end position. Debt to debt plus equity was 31.2 per cent as at 30 June 2004 compared with 44.5 per cent at the same time last year. Again, the revaluation of generation assets, announced with the 2004 year end result, is the main driver of this reduction in gearing.

At this early stage of the financial year it is difficult to predict year end results, however, the first quarter result is pleasing and reflects TrustPower's ability to manage wholesale market risks in both high and low price periods. At this stage the Directors are confident that another good result for the full year is achievable.

HM TITTER
CHAIRMAN


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