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Contact Energy Annual Meeting

19 October 2006

Contact Energy Annual Meeting

Contact Energy today held its Annual Meeting for the year ended 30 June 2006 in Auckland.

Off the back of a strong result for the 2005 / 06 financial year, Chairman Grant King outlined two key challenges that the company faces in the forthcoming year – considering investment in an uncertain regulatory environment, and securing a competitive gas supply.

Mr King also acknowledged that the termination of the proposed merger with Origin Energy in June had been a disappointment for the company.

“Shareholders can be assured that the significant commitment of resources to pursue the merger proposal was made on the basis that it was considered to be in the best interests of Contact shareholders and worthy of your consideration,” he said.

Mr King reiterated that the process followed by the Independent Directors in respect to the merger had been entirely appropriate.

The meeting was the first for Contact’s new Chief Executive, David Baldwin, who started in his position at the beginning of May.

Mr Baldwin outlined that Contact is in the middle of a comprehensive review of the business, out of which will come a strategic plan to guide the company’s future development.

Mr Baldwin confirmed that Contact has agreed to proceed to the tendering stage for the construction of Otahuhu C – a 400MW combined cycle gas turbine power station next to the company’s Otahuhu B plant in Auckland. Contact already holds the resource consents required to construct the power station.

“Otahuhu C is the best new thermal generation option for New Zealand,” he said. “It would provide a significant amount of base-load electricity directly to Auckland and help improve security of electricity supply not only to Auckland but to the country.”

Mr Baldwin said proceeding to the tendering stage would allow Contact to fully evaluate the project in support of a final investment decision. The final decision would depend, among other things, on the company’s ability to secure gas for its natural gas fired power stations in the post-Maui environment.

“Last winter, Contact’s natural gas power stations helped get the country through a period of extremely tight electricity supply, demonstrating that combined cycle gas turbines are the ideal back-up to New Zealand’s renewable generation base.”

Mr Baldwin said with natural gas producing well under half the carbon emissions of coal, it was the cleanest and most efficient thermal back-up option available for New Zealand.

Mr Baldwin signalled potential new investment, depending on resource consents, of more than half a billion dollars over the next decade in renewable geothermal generation options. He said the company was currently undertaking due diligence on a number of windfarm sites.

Mr Baldwin said Contact faced a number of challenges in its operating environment, particularly as the company adjusted to the end of cheap and flexible Maui gas.

However, he said Contact will manage these challenges and deliver ongoing value to customers and shareholders.

“I am delighted to be back in New Zealand and to be given the opportunity to guide Contact through its next phase of growth.

“Now is an exciting time, both for Contact and the energy sector generally, and I am committed to turning the challenges we face into opportunities for the company.”

The Chairman's speech, Chief Executive's speech, and presentation slides are available on the Contact website at www.contactenergy.co.nz.

ENDS

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