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TrustPower AGM Chairman's Address

30 Jul 2009

For the year to 31 March 2009, TrustPower reported a consolidated profit after tax of $105.1 million compared with $98.1 million for the previous year.

The Company delivered Earnings Before Interest, Tax, Depreciation, Amortisation and Fair Value Movements on financial instruments of $260 million which was a 25 per cent increase on the previous year.

TrustPower's balance sheet as at 31 March 2009 remains in good shape. Shareholders' funds have increased to $1.43 billion from $1.26 billion.

TrustPower has a policy of independently reviewing the value of its generation assets at least every three years. An independent valuation was completed as at 31 March 2007. However, accounting rules require that key valuation inputs are re-examined annually and if there has been a material change then a revaluation must be undertaken.

TrustPower determined that there had been material changes in forward electricity prices to warrant a revaluation being completed as at 31 March 2009. Additionally, a number of generation projects were completed since the last revaluation namely, Tararua Stage III wind farm, Deep Stream hydro and the Snowtown Wind Farm.

The financial impact of the revaluation has been an uplift in generation asset values of $260 million.

It is reassuring to note that the company's newly developed projects contributed materially to this revaluation gain, reflecting a solid track record of successful new project management and the care taken to evaluate project risks before putting shareholder's capital into new projects.

TrustPower continues to maintain high levels of committed credit facilities. Including subordinated bonds, TrustPower currently has over NZD 1 billion of committed debt funding in place and unutilised committed funding available of around NZD 250 million. During the 2009 financial year TrustPower successfully raised NZD100 million of seven year subordinated bonds from retail investors. TrustPower is one of only three corporate issuers that have successfully raised subordinated debt over the last two years.

TrustPower has paid dividends of 43 cents per share for the 2009 Financial Year including a 10 cent unimputed special dividend paid in December 2008. This compares to 30 cents per share in the 2008 Financial Year. A further 10 cent unimputed special dividend was paid to shareholders last month.

Debt (including subordinated bonds) to debt plus equity was 33.9 per cent at year end, including the impact of the revaluation of generation assets, versus 34.3 per cent in the previous year.

Your company continues to work hard at building a range of growth options in New Zealand and in Australia. Exclusively we have targeted low impact hydro developments and wind projects in locations with good wind resource, low connection costs and a high level of community acceptance.

Internationally carbon pricing is becoming an entrenched feature of European markets and internationally through the trading of carbon credits. mportantly this extends to the developing world and 17,000 MW of renewable wind projects have been built on the back of sale of CDM credits to Europe and other countries with Kyoto obligations.

Closer to home the New Zealand Government is undertaking a review of climate change legislation. A select committee is due to report to Parliament shortly and the Government has advised that it intends to have an amended Emissions Trading Scheme ("ETS") enacted by September 2009. However, the Government has also indicated that it would like to see harmonisation, where possible, with the proposed Australian Carbon Pollution Reduction Scheme ("CPRS"). Implementation of the Australian scheme is likely to be delayed until 2011 but broad cross party support is now evident in Australia and it is the details that are being debated.

New Zealand is in a very fortunate position in that we have amongst the best wind resources in the world and we have considerable hydro peaking already in place to firm up power on non windy days. Wind is a very competitive option for our energy needs and New Zealand has only a relatively modest increase in electricity prices to allow all our growth in base energy to come from renewable resources for quite some time.

Australia has enjoyed low cost energy for a very long time but it has a far more challenging task in managing a transition to an economy that reflects full international carbon pricing. Australia does not expect its initial CPRS alone to do enough to move to a more renewable energy base and the Australian Government has announced that it intends to increase the Mandatory Renewable Energy Target ("MRET") from 9,500 GWh per annum to 45,000 GWh by 2020 and for the scheme to remain in place through to 2030. The extension of this scheme will support new renewable energy development in Australia, in particular wind development which is currently viewed as the most economic renewable generation option.

Your company's approach is simple - to identify good sites for projects, to secure the consents and development rights and then to execute when market conditions reflect that more energy is needed and when we can get good competitive contracts and prices and warranties from suppliers. Our aim is not to get bigger but to add shareholder value.

TrustPower currently has consents for 440MW of wind farm development in the South Island and is well advanced with a further 118 MW of South Island hydro consents at Arnold and Wairau. TrustPower is progressing negotiation with a small number of parties that have appealed the Arnold consent with the objective of avoiding another costly Environment Court process. The Wairau consent appeal will inevitably go through an Environment Court process and a hearing has been scheduled for October 2009. The Company is undertaking further analysis in preparation for this process.

In Australia, the TrustPower Group has planning consent for up to another 235 MW of capacity at the Snowtown Wind Farm and has approval for an extension to the 48 MW Myponga Wind Farm planning consent.

Good progress is being made in reaching agreement with landowners for potential wind farm developments at a number of New South Wales, Victoria and outh Australia sites.

On 1 April 2009, the Minister of Energy and Resources announced that there will be a ministerial review of the New Zealand electricity market. The stated objective of the review is to improve the performance of the
electricity market and its institutions and governance arrangements. The review will consider the findings of a number of recent reviews and investigations including Commerce Commission reports on wholesale and retail competition. A Technical Advisory Group of six experts has been appointed to support the review process and advise the Minister. A discussion paper is expected to be provided to Cabinet and then released for public consultation shortly. Any legislative change arising from the review is expected to be enacted by June 2010.

TrustPower considers the New Zealand market structure to be fundamentally sound and in our experience retail competition is alive and well. We expect the basic market structure to be endorsed as the best model to ensure a flexible robust electricity sector for New Zealand. It is easily forgotten that the market structure with its competing generators and developers has ensured that New Zealand has a very wide range of potential new projects and the market has coped very well with quite dramatic changes following on from the end of cheap flexible Maui gas and now with the move to a substantially renewable base.

There is however areas where refinements are needed and we expect to see some recommendations for changes. It is likely some roles will be reorganised for improved governance of the industry's market institutions.

Importantly we expect to see some steps to ensure power companies recognise fully the commercial consequences of contracting to sell more power than they have supply to cover in a dry year.

Security of supply within a market framework relies on retailers having strong commercial accountability for having sufficient supply or energy contracts to meet their sales in a dry year.

Commercial accountability can be reinforced through minor changes to pricing mechanisms as hydro shortages are approached.

In New Zealand, commercial accountability is also considerably blunted by the dominance of unlisted SOEs.

Security of supply for New Zealand would be improved by partial privatisation (a 20% float) of the SOEs which would result in a permanent strengthening of commercial accountabilities.

Looking now at the first quarter of the current financial year. TrustPower's New Zealand generation production was 488 GWh in the first quarter, 8 per cent above same period last year but around 14 per cent below long term average production driven mainly by lower generation from both North Island hydro assets and the Tararua Wind Farm.

The Snowtown Wind Farm produced 79 GWh during the first quarter which was around 13 per cent below long term expectation. Mass market customer sales were up 2.7 per cent for the first quarter compared with prior period mainly attributable to an increase of 6,000 customers.

Time of Use sales were down 22 per cent due mainly to the restructuring of a major industrial contract in June 2008, however, the impact on the Company's earnings from this arrangement is not material.

While it is too early to make predictions with respect to TrustPower's full year trading result the Directors are satisfied with the Company's year-to-date trading performance.

I will now hand over to Keith for his presentation. As you know Keith is hanging up his TrustPower boots at the end of this year and I will take the opportunity to speak on this later in the meeting.

Thank you
Bruce Harker

TrustPower Annual Meeting Presentation

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