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Independent Directors Advise Shareholders

27 September 2004

Independent Directors Advise Shareholders To Not Accept Origin Takeover Offer

The Independent Directors of Contact Energy announced today they are recommending that shareholders not accept the cash offer of $5.57 per share from Origin Energy New Zealand Limited (Origin).

The details of the recommendation, and the reasoning behind it, are set out Contact¡¦s Target Company Statement, which is being mailed with Origin¡¦s offer documents to all Contact shareholders as from today.

The Target Company Statement has been approved by Contact¡¦s Independent Directors, comprising Mr Phil Pryke (Chair), Mr John Milne, Mr Tim Saunders and Dr Patrick Strange, under delegation from the Board. This Statement also includes the Independent Adviser¡¦s Report prepared by Grant Samuel & Associates Limited and required to be commissioned under the Takeovers Code.

¡§The Independent Directors unanimously recommend that shareholders not accept the offer¡¨ said Chairman of the Independent Directors Committee, Mr Phil Pryke.

¡§The Independent Directors have come to this conclusion based on a number of factors. These include:
ƒ¤ the offer price falls below the value range of $5.74 to $6.34 (mid-point of $6.04) assessed by Grant Samuel, the independent adviser appointed to prepare a report on the merits of offer;
ƒ¤ the offer price falls below the value range of $5.69 to $6.29 (mid-point of $5.99) assessed by Cameron & Company Limited, the financial adviser to the Committee of Independent Directors; and
ƒ¤ the offer gives no premium to the current share price for Contact. Rather, the offer is at a discount to Contact¡¦s recent share price history.

¡§Furthermore, the Independent Directors believe that the offer price does not reflect Contact¡¦s strong position in the New Zealand electricity and gas markets, or the growth opportunities available to Contact.¡¨

¡§This growth potential is reflected in the strong financial performance we expect the business to achieve this financial year¡¨ said Mr Pryke.

¡§As shareholders will see from the Target Company Statement, our current expectation is that Contact will record a net surplus after tax of approximately $143 million this financial year¡¨.

Mr Pryke went on to say that there are good grounds to expect the business to achieve further earnings growth in the next few years for the reasons set out in the Grant Samuel Report.

¡§Accordingly, the Independent Directors believe that shareholders are likely to derive more value in current circumstances by not accepting the cash offer from Origin.¡¨

¡§Having said that, the Independent Directors also recognise that Contact¡¦s future share price cannot be predicted with certainty. To help shareholders make a considered decision, we have taken the opportunity also to outline in the Target Company Statement what we see as some of the key risks and opportunities around the company¡¦s projected future performance.¡¨

¡§The Independent Directors strongly encourage all shareholders to read the Target Company Statement, and to consider seeking advice from an independent adviser as regards their individual circumstances.¡¨

¡§In conclusion, the Independent Directors believe that the price offered by Origin is below the current fair value for Contact shares and we recommend that shareholders not accept the offer. The Independent Directors will not be accepting the offer for shares they themselves own or otherwise control.¡¨


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