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TrustPower Limited Half Year Result

Thursday, 27 October 2005

TrustPower Limited Half Year Result Six Months Ending 30 September 2005

TrustPower's unaudited after tax surplus for the six months to 30 September 2005 was $50.7 million, compared with $40.1 million for the same period last year. Earnings before Interest, Tax, Deprecation and Amortisation ("EBITDA") were $107.3 million versus $92.0 for the prior period.

The second quarter's trading environment saw a continuance of conditions experienced in the first quarter this year. Lake storage levels and inflows were below average leading to significantly higher spot electricity prices, the reverse of the previous half year. TrustPower's load weighted average price paid for the half was $76 per MWh versus $37 per MWh in the first half of the 2005 financial year.

TrustPower's own generation assets produced 999 GWh during the first half versus 1,100 GWh in the first half of the prior period. TrustPower's hydro generation storage catchments remain at satisfactory levels which together with purchase contracts the Company has in place, leaves TrustPower adequately positioned to meet customer demand over the remainder of the 2006 financial year.

Customer numbers have fallen by around 2,000 from the end of the first quarter of FY2006 to be at 222,000 at the end of September 2005. Total electricity sold to customers in the first half of FY 2006 totalled 2,453 GWh compared with 3,009 GWh sold in the same period last year. The majority of the sales reduction was due to the impact of a large industrial customer now purchasing electricity directly from the wholesale market rather than purchasing through TrustPower. This change has had only a minor impact on TrustPower's financial results.

The Company's balance sheet remains strong with relatively minor movement from the 2005 financial year end position. Debt to debt plus equity was 27 per cent as at 30 September 2005 compared with 30 per cent at the same time last year.

Negotiations on key project contracts for the Tararua Stage III wind farm are close to finalisation and are expected to be completed shortly. Subject to satisfactory conclusion of these negotiations it is expected that the Board will approve the construction of the wind farm. The project is a 93MW expansion of the existing Tararua wind farm site. The Company will erect 31 3MW wind turbines which are expected to produce close to 350 GWh of electricity per annum, enough to supply 45,000 homes.

The cost of this development is $180 million and will be funded from the Company's existing debt facilities. Construction is expected to take 18 months with full commissioning planned to occur ahead of winter 2007. Once Stage III is completed the Tararua wind farm is expected to produce over 25 per cent of TrustPower's total generation meaning that wind generation will become an important part of the Company's portfolio of renewable energy generation assets.

The Wairau hydro generation project in Marlborough continues to progress through its resource consenting process. TrustPower lodged a resource consent application in early July 2005 The application was notified in September 2005 with submissions due to close early November 2005. A resource consent hearing is expected to be held during the first quarter of 2006. TrustPower is engaging with interested groups as part of the process.

The Company is pursuing a number of other wind farm opportunities around New Zealand particularly in the South Island. Progress is also being made with a major enhancement to the Arnold hydro scheme on the West Coast.

TrustPower' Australian wind farm investments remain under review. On 30 September 2005, the Essential Services Commission of South Australia ("ESCOSA") announced a number of technical conditions that wind projects in South Australia will need to meet in order to obtain a generation license.

The Company's initial view is that the conditions will be challenging and expensive to meet, in particular, the requirement for wind farms to effectively operate as scheduled generators.

Given the variability of wind as a fuel source TrustPower believes that wind generators need to operate in the market as unscheduled generators and its submissions to ESCOSA during industry consultation recommended this approach. TrustPower is currently considering the impact of the ESCOSA conditions on the future viability of its South Australian projects and is considering a range of options.

Taking the trading result into account, the Directors have declared an interim dividend of 11.0 cents per share (9.0 cents per share last year). The dividend will be payable on 16 December 2005 to all Shareholders on the register at 2 December 2005. This dividend will be fully imputed and a supplementary dividend will be paid to non-resident shareholders.

The first half 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 financial outcome for the full year is achievable.


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