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Power Retailing in New Zealand Set To Be Unbundled


NOVEMBER 6, 2007

Power Retailing in New Zealand Set To Be ‘Unbundled’ As Pulse Utilities NZ Aims For NZAX Listing

The power retailing industry in New Zealand is on the way to being ‘unbundled’, with energy company Pulse Utilities NZ announcing its proposed listing on the NZAX in mid-November.

Following several years of development, Pulse is on track with its plans to give New Zealand consumers access to significantly cheaper electricity and roll out a network of smart electricity meters to provide consumers with more control over their electricity usage.

Pulse believes household electricity consumers and small businesses have had a raw deal for many years, paying far too much for their power and are facing more rises in the future through their traditional suppliers. Pulse intends to deliver cheaper power to its customers – much closer to the wholesale price, says James Martin founder and CEO of Pulse.

In addition the patented smart meter technology will allow consumers to make better choices on how they use power.

Pulse directors believe the potential for its business is significant, with growing disquiet among consumers about rising power prices. Pulse is a registered electricty retailer, one of only seven able to offer time-of-use electricity supply contracts. Its business model is based on offering consumers lower cost electricity whilst retaining a fixed daily fee for asset rental and retail services. This strategy will deliver significant growth in its asset base and provides utility-grade ongoing cash-flows. In time, additional services, such as alarm monitoring and home automation will be added to the same smart device to provide additional revenue in the future, thus increasing the “stickiness” of the asset, according to Mr Martin.

In a letter to shareholders, Pulse directors state: “With a successful listing, a larger group of shareholders, and additional funds, we will be in a position to begin full implementation of our business plan in preparation for a launch of our retail offering in early 2008.”

A former Sky Network TV executive, Mr Martin says: “The timing is right – latest data shows a 28.2% increase in the price of power for residential consumers over the past six years and, a further increase of up to 20% from meeting obligations in emissions trading targets under the Governments Kyoto proposal.

“With environmental and pricing issues to the fore, the conditions are ideal for our technology and approach that will enable consumers to save money and power. Thus, Pulse could also be considered a ’green’ stock,” says Mr Martin.

“We view this very much as an ‘unbundling’ of the power retail sector, much along the lines of the developments that have been taking place in the telecommunications industry. The parallels are very clear.

“This is an exciting time for Pulse and consumers , as retail competition has finally arrived. Our target in New Zealand is conservatively estimated at 61,000 customers by year five, a projected 3.5% of electricty connection points. If this level of market penetration is achieved, our business plan anticipates that Pulse would be earning revenues of approximately $93 million and a projected profit of $11 million after tax. This makes Pulse an exciting long-term prospect for investors. None of these projections include Australia.”

The Company’s profit projections are only based on its New Zealand activites but Pulse intends to expand into the Australian market, which is gearing up for replacement of up to eight million meters from December 2008. Pulse already has the exclusive rights to use its unique technology in Australia as well as New Zealand.

Mr Martin formed Pulse Utilities seven years ago to develop the advanced meter technology. With the ability to remotely read, report and act on customer power consumption every half-hour the technology was the first certified mass-market meter device developed in New Zealand, and has continued enhancements to the product since.

Don Purdon has recently been appointed as Executive Chairman. Pulse will not be raising money from the investing public prior to its float. It expects to list on the NZAX in mid-November via a compliance listing facilitated by Tasman Capital Ltd says Mr Purdon. Pulse plans a migration to the main NZSX board at a later stage.


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