Rights For 270,000 AECT Beneficiaries Preserved

Rights For 270,000 AECT Beneficiaries Preserved For 70 Years

AUCKLAND, September 22, 2002 - The rights of nearly 270,000 households and businesses have been preserved for the next 70 years in a landmark deed agreed between the Auckland Energy Consumer Trust (AECT) and electricity lines company VECTOR.

The new deed enshrines essential operating requirements that must be provided for beneficiaries of the AECT by VECTOR .

In particular, the deed means that Aucklanders in the current VECTOR electricity lines network are guaranteed the following benefits:

* Spending of around $10 million a year to underground existing overhead electricity lines

* A small customer pricing policy which will hold electricity line charges at least flat in real dollar terms

* A target dividend payout ratio to shareholders in VECTOR equivalent to 85 percent of annual net profit after tax

In effect, the Deed conserves for AECT beneficiaries until August 2073, all of the privileges that they have enjoyed since the trust was formed in 1993.

"Given all of the changes in the electricity industry over the past decade, and the growth opportunities that VECTOR is now beginning to realise, it is tremendous that the Trust has been able to safeguard these rights for our beneficiaries," said Karen Sherry, chair of the AECT.

"I believe that the current trustees of the AECT can be justifiably proud that they have protected these rights, not just for their current beneficiaries, but for future generations as well," said Ms Sherry.

At the same time, the AECT has just approved a deal that is expected to see VECTOR take control of fellow New Zealand electricity lines company UnitedNetworks, thus bringing back into New Zealand ownership significant and strategic assets that have been under foreign control.

"Our goal is to maintain and enhance the value of our assets for our beneficiaries. We are achieving that through VECTOR's transaction with UnitedNetworks, and this Deed is the icing on the cake for our beneficiaries," Ms Sherry said.

Vector has said it will initially fund its acquisition of UnitedNetworks from bank debt, but has also said it would be financially prudent to look at other funding options for the longer term. This might include offering the public of New Zealand the chance to invest in the enlarged organisation through a capital bonds issue or an initial public offering of shares.

The Trust has promised it will not sell down its investments, but funding options for growth mean private kiwi investors could be offered the opportunity to support the repatriation of significant local assets.

"Given that the rights of our consumer beneficiaries are protected, this is a win, win situation for New Zealanders," Ms Sherry said.

The contract that protects the rights of consumer beneficiaries is officially known as the Deed Recording Essential Operating Requirements. The Deed is conditional on VECTOR completing its acquisition of United Networks. It guarantees:

Pricing Policy

Charges for residential consumers on the VECTOR network will not exceed charges for services in place as at April 1, 2002 by more than the percentage increase of the consumers price index and any new external costs such as taxes, rates or levies. Such external costs exclude VECTOR operations and financing costs.

If the company does want to increase its costs by more than the CPI, the Trust will have to be fully consulted and satisfied that there is reasonable cause.

Undergrounding

VECTOR will continue with its overhead improvement programme whereby approximately $10 million a year is spent undergrounding existing overhead electricity lines. .

If the company does not meet this target in any year, it will be averaged out over a four-year period.

Dividend Policy

The company will endeavour to distribute to shareholders all funds surplus to the investment and operating requirements of the company, with a target dividend payout ratio of 85 percent of net profit after tax.

The company might smooth the effect of any variation in profit due to one-off gains or losses.

Ms Sherry said the Trust was confident this policy would ensure enhanced returns for AECT beneficiaries over time.

"This Deed represents a momentous achievement for what is potentially a unique public-private partnership. It is commercially sensible and a landmark agreement," she said.

ENDS

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