Northpower Annual Report

Date: Monday 9th July 2007

Subject: Northpower Annual Report

This year ended with a strong financial result and saw a number of strategic milestones achieved. Financial targets were exceeded with net profits increasing by $2.7M (22%) on the previous year to $14.7M. This significant gain was due to growth on the electricity network as well as increased contracting activity. The result is consistent with the trend of strong growth over the last 10 years, in which net returns have increased by 300%. The achievement of these key milestones signifies that Northpower is on track to achieve its strategic objectives. Northpower is 10 years into its plan to evolve from being an effective but vulnerable small electricity distributor, to a substantial customer focused service provider.

Northpower milestones (2006/2007):

- The company reached its target market coverage for its contracting services in the New Zealand electricity distribution sector with the opening of a new branch in Napier. The new branch complements the seven other Northpower offices throughout the North Island.

- Contracting activity revenue exceeded $100M.

- Access to the Australian market was achieved.

- Transmission line construction contracting business was initiated.

- The communications contracting business established ongoing viability.

- Asset management capability was firmly established with the implementation of new systems and a successful asset maintenance model on the electricity network.

- $6M Wairua Hydro Power Station upgrade was started; completion scheduled for July 2007.

- Safety philosophy took on real intrinsic value within the company as a result of employee and family based initiatives.

These milestones were achieved in line with a number of business highlights during the year.

- Northpower remained one of only three companies permitted by the Commerce Commission to increase lines charges by the maximum factor of CPI +1%. This is due to low prices and high productivity. Despite this Northpower continued to have some of the lowest line charges in the country

- Northpower provided customers with a line charge holiday again, paying out $6.5M in February 2007 and a further $4.15 million dividend was paid to the Northpower Electric Power Trust.

- Northpower was awarded the ‘Electricity Supply Industry Safety Award’ for significant industry achievement and contribution to improving health and safety performance.

- The main highlight of the safety initiative was the widespread participation in the two Family Days held at the Whangarei and Auckland depots. More than one thousand employees and their families took part in the events that provided an understanding of what field staff do. The event reinforced the importance of employees, their families, and Northpower working together to improve the safety performance.

ENDS

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