Result for the Six Months Ending 30 September 2007

Media Statement
Wednesday, 31 October 2007

TrustPower Limited First Half Result for the Six Months Ending 30 September 2007

TrustPower's unaudited after tax surplus for the six months to 30 September 2007 was $63.1 million, compared with $58.9 million (restated for NZIFRS adjustments) for the same period last year. The result for the period includes a reduction in tax expense of $7.4 million attributable to a lower deferred tax liability arising from the change in the corporate tax rate from 33 per cent to 30 per cent effective from 1 April 2008.

Earnings before Interest, Tax, Depreciation, Amortisation, and adjustments for financial instruments ("EBITDAF") were $116.2 million versus $114.2 million for the prior period.

The first half year trading environment was characterised by weak hydro inflows but also lower than average electricity spot prices. This was in contrast to the favourable trading conditions experienced by the Company during the first half of the previous year when there were very good hydro inflows as well as above average wholesale spot prices for a prolonged period.

TrustPower's own generation assets produced 1106 GWh for the half versus 1082 GWh in the prior period. While wind production was higher than the previous half, boosted by the commissioning of the 93MW expansion of the Tararua Wind Farm, hydro generation was well down on long term average. TrustPower's hydro generation storage catchments have improved during October which, together with purchase contracts the Company has in place, leaves it well positioned to meet customer demand over the remainder of this financial year.

Customer numbers have increased slightly to around 220,000. Total electricity sold to customers in the first half totalled 2,361 GWh compared with 2,414 GWh sold in the prior period.

The Company's balance sheet remains strong. The ratio of debt to debt plus equity was 30 per cent as at 30 September 2007 up slightly from 28 per cent at the same time the previous year.

Construction on the 5 MW Waipori hydro enhancement continues but progress has been slower than schedule due to adverse weather conditions. Completion is now expected by February 2008.

Provisional resource consent has been received for the 72 MW Wairau hydro generation scheme in Marlborough. However, a further process is required to determine the specific conditions of the consent, which are expected to be advised by first quarter 2008.. Once conditions have been finalised, subject to appeal, the Company will assess project economics and the next steps to be taken in the development process.

A resource consent hearing for up to 46 MW of hydro generation at Arnold, on the West Coast, is scheduled to commence on 5 November 2007. The resource consent decision for the 200 MW Lake Mahinerangi wind project in Otago has been released, the Company is currently working through the appeal process.

A resource consent application for up to 240 MW of wind generation at Kaiwera Downs in Southland is expected to be lodged in November. TrustPower continues to actively assess other wind and hydro generation opportunities particularly in the North Island.

The Government released the framework for a New Zealand Emissions Trading Scheme ("NZETS") in September. The NZETS will progressively involve all major sectors of the economy and the six greenhouse gases specified in the Kyoto Protocol with the electricity industry incorporated from 2010. The NZETS will be linked to international trading markets to support liquidity.

TrustPower welcomes the level of certainty provided by these policy announcements.

The Government has followed up the introduction of the NZETS with the recent release of its New Zealand Energy Strategy to 2050 ("NES"). The key proposals in the NES are that:

"The Government has set a target of 90 per cent of electricity generated from renewable sources by 2025 (currently around 70 per cent of New Zealand's electricity is sourced from renewable energy).

"The Government is considering regulatory options under the Electricity Act to support the Government's objectives for limiting new base load fossil fuel generation over the next ten years.

"The Government is developing a National Policy Statement under the Resource Management Act for renewable energy that could be in place in 2008 to support more efficient processing of resource consent applications.

"The Electricity Commission and Transpower are developing planning processes and guidelines to better co-ordinate transmission and renewable energy investment.

While overall the Company views the NES and NZETS as positive for the value of its existing assets and its New Zealand based generation development prospects, it is disappointing that the Government has not acknowledged in the NES that the existing High Voltage Direct Current ("HVDC") cost allocation methodology is a significant economic impediment to progressing South Island based renewable generation projects.

TrustPower finds this somewhat surprising given the ambitious target that the Government has set for itself for 90 per cent renewable sourced electricity generation by 2025 and that, in the Company's view, South Island renewable projects must to be progressed to support the achievement of this target. TrustPower believes that HVDC cost allocation needs to be resolved as a matter of priority within the policy development and legislation that will be necessary to support the NES.

Civil construction on the 88 MW Snowtown wind project in South Australia is nearing completion and the project schedule remains on target. The Australian Government has recently reported that it plans to announce a long-term emissions reduction goal in 2008. It has also announced the likely introduction of an emissions trading scheme based on a "cap and trade" model beginning 2011. In the lead up to the Australian Federal Elections, both the Government and the Opposition Labour Party have pledged to substantially lift renewable energy targets by 2020 which should be supportive for further renewable generation investment following enactment of legislation.

During October, TrustPower was recognised internationally as one of two country level winners for Australia and New Zealand in a Top Companies for Leaders 2007 Survey conducted by Hewitt Associates, the RBL Group and Fortune Magazine. Attracting and retaining key talent and demonstrating strong accountability for leadership behaviours at all levels of the organisation has been a significant contributor to this result.

Taking the trading results into account, the Directors have declared an interim dividend of 15 cents per share (13 cents per share last year). The dividend will be payable on 14 December to all Shareholders on the register at 30 November 2007. This dividend will be fully imputed and a supplementary dividend will be paid to non-resident Shareholders.

The result for the first half to 30 September 2007 was satisfactory given the lower than average level of hydro generation produced and lower spot electricity prices. At this stage the Directors are confident that the business fundamentals are sound, which augurs well for a satisfactory annual result.

BJ HARKER CHAIRMAN

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