Contact Energy Halfyear Report

For the six months to 31 December 2008 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contents

1 Summary

2 Chairman and Managing Director’s statement 5 Management discussion of financial results 16 National overview

Financial contents 17 Condensed Interim Financial Statements 23 Notes to the Condensed Interim Financial Statements 35 Audit Report WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 1 Summary for the half year ended 31 December 2008

• Extreme weather in combination with transmission constraints contributed to lower underlying earnings after tax of $79.9 million, down from $116.1 million for the six months to 31 December 2007.

• Progressed construction on Contact’s 200 megawatt gas-fired peaking power station at Stratford on schedule and on budget.

• Progressed construction on Contact’s Tauhara phase one 23 megawatt geothermal binary power station near Taupo on schedule and on budget.

• Secured final resource consents for Contact’s proposed 220 megawatt Te Mihi geothermal power station near Taupo.

• Commenced injection of gas into Contact’s Ahuroa underground natural gas storage facility near Stratford.

• Filed resource consent applications for Contact’s proposed 177 megawatt Waitahora wind farm in southern Hawke’s Bay – consent hearings started for this project in mid-February 2009. _ _ • Secured a ‘call-in’ for Contact’s 540 megawatt Hauauru ma raki Waikato wind farm project, with a Board of Inquiry hearing scheduled to start in April 2009.

• Completed the roll out of 21,000 new smart meters for customers in the Christchurch region. Contact will complete the initial deployment of smart meters in Christchurch in June 2009.

• Operated a 100 megawatt New Plymouth gas-fired generator unit, previously decommissioned due to an asbestos discovery, to help the country through a dry winter with tight electricity supplies.

• Upon announcing the half year result in February 2009, Contact also announced a Profit Distribution Plan, under which shareholders will receive distributions in the form of non-taxable bonus shares, with the opportunity to have those shares, or a portion of them, bought back by Contact for cash.

• Contact also announced it is seeking to raise $300 million through a retail Bond issue, with the ability to accept unlimited oversubscriptions. The unsecured, unsubordinated fixed rate Bonds are issued by Contact Energy Limited under an Investment Statement dated 23 February 2009 and offer investors an interest rate of 8.00 per cent per annum, payable quarterly, and have a five year term (maturing in May 2014). On 6 March 2009, the offer was capped at $550 million. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 2 Contact Energy Limited Half Year Report 2008 Chairman and Managing Director’s statement

Despite a particularly challenging half year, Contact remains well positioned to continue to lead investment in New Zealand’s most important energy projects, and deliver growth for the company’s shareholders.

Introduction New Zealand’s electricity system depends on a robust and reliable transmission backbone to transmit electricity from power stations across the country to customers. For a country with a heavy reliance on hydro generation and the potential requirement for increasing quantities of wind generation, and with major load centres geographically isolated from key generation sources, a modern transmission grid that accommodates changing electricity generation and demand patterns is critical to the efficient operation of the electricity market. Over the past year, it has become manifestly clear that many parts of New Zealand’s transmission system have been unable to cope with requirements. Investments made over the preceding decades, particularly the 1970s and 1980s, were oriented towards strengthening New Zealand’s transmission backbone to support the movement of energy between the South and North Islands and within the islands. However, since 2000, demand has grown by between 2 and 2.5 per cent per annum without any significant increase in transmission investment. Even prior to the unexpected decommissioning of the High Voltage Direct Current (HVDC) Pole 1 in November 2007, the transmission system was showing signs of strain. New Zealand has had three reasonably dry winters since 2000. In each of those years, the HVDC has played a critical role in enabling North Island thermal generation to support the South Island during the periods of low hydro generation. Contact’s financial performance during such periods was generally positive, particularly in light of its ability to access flexible, relatively cheap natural gas from the Maui field. Equally, during periods of high hydro inflows, the flexibility of legacy Maui gas supply arrangements enabled Contact to balance generation from its gas-fired stations in order to maximise use of the cheaper hydro generation. This combination of the ability to move energy across the HVDC and to increase or reduce gas take freely was a large contributor to Contact’s ability to perform well irrespective of weather conditions. However, a number of factors have started to impinge on the flexibility and capacity of New Zealand’s electricity sector: • Demand has continued to rise across both islands. However, the South Island has seen very little increase in new generation. As a result, in dry conditions, there is an increasing dependence by the South Island on the HVDC to ensure security of supply. Transmission constraints are also more prevalent. • Legacy Maui gas supply arrangements have largely expired. Current gas supply contracts have relatively flat and fixed daily take requirements, which constrain the ability of gas-fired power stations to adjust their output in response to hydro inflows. • Pole 1 of the HVDC was unexpectedly decommissioned in November 2007. For the majority of the time, the remaining pole (Pole 2), together with available generation capacity in each island, is sufficient to ensure North and South Island electricity demand is met at a similar cost. However, during periods of extreme weather, such as the drought last winter and the high inflows over the summer, the absence of a second Cook Strait cable can result in the islands operating as separate markets, often with a significant loss of system efficiency. During periods of extreme drought in the South Island, the system needs two poles to move energy from the North Island to the South Island. Equally, when inflows into the southern lakes are very high, hydro becomes the cheapest source of electricity for the country and requires two poles to maximise flow to the North Island to minimise both the spilling of water and the use of thermal fuels. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 3

In the recent period, Contact has implemented a series of strategies to mitigate the impact of transmission system constraints and gas supply inflexibility. These include: • In September 2008, Contact increased tariffs to reflect the risk of inter-island price separation recurring during periods of low hydro inflow arising as a consequence of the decommissioning of Pole 1. Unsurprisingly, other South Island retailers have adjusted tariffs to similar levels. • In December 2008, Contact started injecting gas into the largely depleted Ahuroa gas reservoir, which Contact acquired in June 2008 to convert into an underground gas storage facility. Although the gas storage project is not expected to be fully operational until 2010, the storage facility is already providing Contact with a valuable source of fuel flexibility by providing an ability to inject and store ‘must-take’ gas during the low demand and high hydro inflow summer months. • Investment in a 200 MW gas peaking plant near Taranaki. As the market experiences increasing volatility due to transmission constraints and weather-related intermittency, fast-start plant of this nature will enable Contact to respond to those events. This, combined with access to gas in storage, will provide opportunities for Contact to leverage volatile market conditions. • Contact is supporting Transpower in its efforts to execute transmission upgrades across the country, including participating in a Transpower procurement advisory group in relation to the project to replace Pole 1 of the HVDC. Pole 3 is currently expected to be operational in 2012. • Contact is also supporting Transpower in implementing other transmission upgrades that, when complete, are expected to largely alleviate other system constraints. These include a project that, upon completion in the spring of 2009, is expected to increase the amount of hydro power that can be transferred out of the Southland/Otago area by up to an additional 150 MW.

Strategic growth initiatives continue to be executed Despite a slowing of near-term demand growth due to prevailing economic conditions, the country will continue to require new generation in the medium to long term. The lack of certainty of domestic gas resources and prices beyond the second half of next decade means that renewable options will continue to be at the forefront of new generation development. Accordingly, Contact is continuing to develop its portfolio of renewable generation options – in geothermal, wind and hydro. On the expectation that the market will continue to experience price volatility through intermittency of generation, the construction of Contact’s fast-start gas-fired peaking plant and its gas storage project, both located near Stratford, Taranaki, also remain central to the company’s renewables strategy, in addition to deriving value from electricity market volatility. The Ahuroa gas storage facility is enabling Contact to purchase natural gas and then store it underground for use when market conditions most support it. As well as allowing Contact to maximise the value of its natural gas, the facility will provide flexibility of supply for the 200 MW Stratford peaking power station when it comes on line in 2010. Contact’s geothermal development programme is particularly important. Geothermal is generally accepted as the most economic next tranche of baseload energy for the country, while increasing the amount of energy generated from renewable, low carbon sources. While Contact is making good progress on consenting two North Island wind farm sites, the current economics of wind will require energy prices to rise before execution of wind projects would be justified. There is a significant role for wind in New Zealand’s energy future, and Contact is preparing its projects for execution when market conditions support them.

Financial position With a gearing of 26 per cent as at 31 December 2008, Contact is in a sound financial position to fund its committed development projects. In order to strengthen capacity, Contact has been developing various alternatives aimed at increasing its available funding, including arranging new bank debt facilities, extending existing facilities and raising capital in the domestic bond market. Accordingly, Contact Energy Limited issued an Investment Statement and Prospectus dated 23 February 2009 relating to a New Zealand retail Bond offer. The offer of unsecured, unsubordinated fixed rate Bonds opened on 2 March 2009, offering investors an interest rate of 8.00 per cent per WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 4 Contact Energy Limited Half Year Report 2008

annum, payable quarterly, and have a five year term (maturing in May 2014). On 6 March 2009, the offer was capped at $550 million. Contact intends to use the capital raised to support its capital expenditure programme, including investment in geothermal development near Taupo, new gas-fired peaking capacity at Stratford, as well as the country’s first underground natural gas storage facility near Stratford and for general operational purposes. The funds may also be used to repay existing debt. Contact has also recently secured additional committed credit facilities of $100 million, increasing its total committed facilities to $685 million. Of those facilities, $195 million has been extended for a further year, to May 2011.

Profit Distribution Plan In addition to increasing available liquidity, Contact has also been considering other means of strengthening the company’s financial capacity. Accordingly, Contact introduced a Profit Distribution Plan, effective from (and including) the half year ended 31 December 2008. Under the Plan, all shareholders will receive distributions in the form of non-taxable bonus shares, with the opportunity to have those shares, or a portion of them, bought back by Contact for cash. As a consequence, shareholders will have a choice of retaining bonus shares and/or receiving cash. The Plan is expected to retain cash within Contact to support the execution of the company’s strategic initiatives, while also allowing shareholders who wish to receive cash the ability to do so. Contact expects to operate the Plan twice a year, in line with past practice of declaring dividends twice-yearly, and does not expect to make any other distributions to shareholders. For the purpose of the 31 December 2008 distribution, shareholders’ entitlements have been set on the basis of the equivalent of 11 cents per share.

Changes to the Contact Board In February 2009, Contact announced the appointments of Sue Sheldon and David Baldwin to its Board of Directors and the retirement of Tim Saunders from the Board, with effect from 30 June 2009. Sue Sheldon has been appointed to the Board after a rigorous succession planning process during 2008. Sue is based in Christchurch and has had previous experience as a director of various companies, including a major energy company. She is a chartered accountant and a highly regarded professional director and will bring valued skills, experience and perspectives to the Board. David Baldwin was appointed Chief Executive Officer of Contact Energy in May 2006 and is seconded from the company’s majority shareholder, Origin Energy. Upon appointment, Mr Baldwin will become Managing Director of Contact. These changes to the composition of the Contact Board are part of an ongoing process of succession planning to ensure that an appropriate mix of skills and experience are available to the Board. These appointments will result in an increase in the size of the Board, which is considered appropriate given the more challenging economic and operating environment that companies now face.

Conclusion The six months to 31 December 2008 have been particularly challenging times for Contact. The company has been impacted by both severe drought in the first quarter and a deluge of water in the second quarter. A combination of these rare weather patterns with significant transmission constraints have negatively impacted the business. While the period has been difficult, Contact has made pleasing progress on the company’s growth investment programme and has taken steps to ensure the company remains well positioned to continue to develop some of the country’s most important energy projects and deliver value to Contact’s shareholders.

Grant King David Baldwin Chairman Managing Director WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 5 Management discussion of financial results for the six months ended 31 December 2008

Overview of financial performance for the period The recent winter and summer extreme weather events, in combination with transmission constraints, have resulted in extremely challenging trading conditions for Contact. These external events significantly contributed to a disappointing half year result for the period ended 31 December 2008, wherein Contact achieved Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation, Financial Instruments and Other Significant Items (EBITDAF) of $224.7 million, down 20 per cent from $281.9 million for the six months to 31 December 2007. Underlying Earnings After Tax for the six months to 31 December 2008 were $79.9 million, down 31 per cent from $116.1 million for the six months to 31 December 2007. At the heart of the half year financial performance was the fact that the mix of generation that has historically largely insulated Contact’s earnings from weather-driven volatility was stymied due to the limitations arising from transmission constraints, primarily (although not solely) due to the loss of Pole 1 of the HVDC. The removal of around 180 megawatts of Southland electricity demand following the unexpected closure of an aluminium production line at the Tiwai Point aluminium smelter in November 2008 further limited generation from Contact’s Clutha power stations. As a consequence of transmission constraints in the lower South Island and an excess of energy, Contact and other South Island hydro generators have been forced to spill significant volumes of water. While there is no certainty as to the timing of the return of this demand, Transpower is currently working on a resolution that is expected to alleviate this lower South Island constraint. As the graph on page 6 illustrates, these conditions led to significant differences in wholesale prices between the North and South Islands in August and September 2008 at a time when Contact was short of generation in the South Island, which resulted in Contact supplying electricity to its South Island customers at a significant loss. While prices dropped towards the end of the half year, the transmission constraints limited the ability of that energy to move to the North Island, resulting in South Island prices being lower than those in the North Island and spilling of water from Contact’s and other hydro generation assets in the South Island. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 6 Contact Energy Limited Half Year Report 2008

Prices vs storage

4,000 $450 1 1 Wholesale prices rise as 3,500 $400 storage drops

3,000 $350 $300 2 South Island price remains ) 2,500 3 Wh $250 high as drought continues (G 2,000 combined with transmission

2 $/MWh $200 constraints Storage 1,500 $150 1,000 $100 3 3 Prices drop dramatically 500 $50 as South Island storage increases – north/south 0 flows constrained 1 Jul 2008 1 Aug 2008 1 Sep 2008 1 Oct 2008 1 Nov 2008 1 Dec 2008 1 Jan 2007 1 F 1 Mar 2007 1 Apr 2007 1 May 2007 1 Jun 2007 1 Jul 2007 1 Aug 2007 1 Sep 2007 1 Oct 2007 1 Nov 2007 1 Dec 2007 1 Jan 2008 1 F 1 Mar 2008 1 Apr 2008 1 May 2008 1 Jun 2008 eb 2007 eb 2008

National mean storage National storage North Island price South Island price

Due to the high wholesale electricity prices that prevailed in the first half of the six month period, total electricity revenue was $103 million or 11 per cent higher than in the six month period ended 31 December 2007. This was driven by a 21 per cent increase in wholesale electricity revenue (as a result of a 48 per cent increase in average wholesale electricity prices offset by a 14 per cent drop in generation volume) and a six per cent increase in retail electricity revenue. However, after netting off retail electricity purchases, total retail and wholesale (net) electricity revenue was $37.0 million lower than for the period ended 31 December 2007 due to a $140 million or 62 per cent increase in electricity purchase costs. In addition, other operating expenses increased by $38.5 million, mainly due to increases in gas and LPG purchase costs. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 7

Total electricity revenue

1,200

1,000 366 800 226 n 680 600 641 NZ$ millio 400

200 307 372 0 December 2007 December 2008 Half year ended

Wholesale electricity revenue Retail electricity revenue Retail purchases

During the six months to 31 December 2008, there were two significant increases in the quarterly Producers Price Index (PPI), which is applied to adjust gas prices in most gas contracts. These recent increases, as well as the completion of Contact’s low cost Maui 367 gas entitlements, are expected to result in the company paying about 25 per cent more per GJ for gas over the 2009 financial year, more than double the expected increase in unit gas costs. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 8 Contact Energy Limited Half Year Report 2008

Key financial information

Variance 6 Months Ended 6 Months Ended 31 December 2008 31 December 2007 $ million $ million $ million % Operating Revenue 1,239.3 1,117.4 121.9 11% Operating Expenses 1 (1,014.6) (835.5) (179.1) (21%) EBITDAF 2 224.7 281.9 (57.2) (20%) Depreciation and Amortisation (78.0) (74.2) (3.8) (5%) Change in Fair Value of Financial Instruments (78.3) 0.6 (78.9) (13,152%) Removal of New Plymouth Asbestos and Related Costs – (30.5) 30.5 Gain on Sale of Mokai Geothermal Land and Rights – 21.3 (21.3) Equity Accounted Earnings of Associates 1.7 1.2 0.5 42% Earnings Before Net Interest Expense and Income Tax (EBIT) 70.1 200.3 (130.2) (65%) Net Interest Expense (35.5) (35.5) – 0% Income Tax Expense (9.5) (47.4) 37.9 80% Profit for the Period 25.1 117.4 (92.3) (79%) Underlying Earnings After Tax 3 79.9 116.1 (36.2) (31%) Underlying Earnings Per Share (Cents) 3 13.85 20.14 (6.3) (31%) Shareholders' Equity 2,874.0 2,927.7 (53.7) (2%)

1 Includes electricity purchases. 2 Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation, Financial Instruments and Other Significant Items. 3 Underlying Earnings After Tax removes one-off items, the non-cash Change in Fair Value of Financial Instruments net of tax, Removal of New Plymouth Asbestos and Related Costs net of tax, Gain on Sale of Mokai Geothermal Land and Rights.

Profit for the period ended 31 December 2008 was $25.1 million. This was negatively affected by a post-tax movement of $54.8 million in financial derivatives. With the introduction of IFRS, the accounting standards require that certain changes in the fair value of financial instruments be reflected in the Income Statement. This can introduce significant volatility to the earnings reported for the year. This impact is primarily driven by financial instruments Contact utilises in order to hedge various price and interest rate risks to which it is exposed. The intention of hedging is to reduce these risks and deliver a higher level of certainty to the cashflows of the business. While Contact utilises valid economic risk management instruments to hedge these risks, these instruments must also meet the stringent criteria prescribed under IFRS in order to qualify for hedge accounting. For those instruments that do not qualify for hedge accounting, the change in fair value is recognised in the Income Statement. The most notable instruments in Contact’s portfolio that do not qualify for hedge accounting are interest rate swaps. With the significant drop in the forward yield curve over the six months ended 31 December 2008, the fair value of the interest rate book has correspondingly decreased. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 9

Retail segment

Variance 6 Months Ended 6 Months Ended 31 December 2008 31 December 2007 $ million $ million $ million % Retail Electricity Revenue 679.5 641.0 38.5 6% Gas Revenue Wholesale 39.7 36.7 3.0 8% Gas Revenue Retail 46.6 47.1 (0.5) (1%) LPG Revenue 85.2 70.6 14.6 21% Other Retail Revenue 6.6 5.4 1.2 22% Total Retail Revenue 857.6 800.8 56.8 7% Retail Electricity Purchases (366.2) (225.8) (140.4) (62%) Electricity Transmission, Distribution and Levies (226.1) (223.4) (2.7) (1%) Gas Purchases and Transmission (82.4) (71.3) (11.1) (16%) LPG Purchases (65.1) (53.6) (11.5) (21%) Labour Costs and Other Operating Expenses (71.4) (70.0) (1.4) (2%) Total Operating Expenses (811.2) (644.1) (167.1) (26%) EBITDAF 46.4 156.7 (110.3) (70%) Depreciation and Amortisation (10.8) (11.2) 0.4 4% Segment Result 35.6 145.5 (109.9) (76%)

Average Electricity Purchase Price ($ per MWh) 1 85.93 52.09 33.8 65% Retail Electricity Sales (GWh) 4,047 4,064 (17) (0%) Electricity Customer Numbers 499,000 514,000 (15,000) (3%) Gas Sales Wholesale Customers (PJ) 6.3 6.6 (0.3) (5%) Gas Sales Retail Customers (PJ) 2.3 2.3 – 0% Gas Sales LPG Customers (Tonnes) 41,800 46,000 (4,200) (9%) Gas Customer Numbers 70,000 74,000 (4,000) (5%) LPG Customer Numbers (including franchisees) 54,400 50,900 3,500 7%

1 This price excludes contracts for differences.

Contact’s retail segment was significantly affected by the 62 per cent increase in retail purchase costs in the six month period ended 31 December 2008. This cost directly resulted in the retail EBITDAF of $46.4 million, 70 per cent lower than the $156.7 million earned in the six month period ended 31 December 2007. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 10 Contact Energy Limited Half Year Report 2008

Retail electricity purchase cost

500 100

400 86 80

n 300 60 52 $/MWh NZ$ millio 200 366 40

100 226 20

0 0 December 2007 December 2008 Half year ended

Spot purchases Purchase price

Set out in the table below are the North and South Island average retail electricity purchase prices by quarter. These prices illustrate the stark changes in hydrology conditions that occurred from the first to second quarters as well as the significant differentials between the North and South Islands.

6 Months Ended 6 Months Ended 31 December 2008 31 December 2007 North Island Retail Electricity Purchases (GWh) 2,267 2,304 South Island Retail Electricity Purchases (GWh) 1,998 1,980 Retail GWh Purchased 4,265 4,284

Q1 North Island Electricity Purchases Average Price ($/MWh) 102 57 Q2 North Island Electricity Purchases Average Price ($/MWh) 47 46 HY1 North Island Electricity Purchases Average Price ($/MWh) 76 52

Q1 South Island Electricity Purchases Average Price ($/MWh) 148 60 Q2 South Island Electricity Purchases Average Price ($/MWh) 37 43 HY1 South Island Electricity Purchases Average Price ($/MWh) 97 52

Q1 National Electricity Purchases Average Price ($/MWh) 124 59 Q2 National Electricity Purchases Average Price ($/MWh) 43 45 HY1 National Electricity Purchases Average Price ($/MWh) 86 52 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 11

Total retail electricity revenue rose six per cent to $679.5 million, with total sales of 4,047 GWh compared with 4,064 GWh in the six month period ended 31 December 2007. Retail electricity customers reduced to 499,000 compared with 514,000 as at 31 December 2007 and 520,000 as at 30 June 2008.

Wholesale and retail gas revenue

60 8 6.66.3 50 6 47.1 46.6

40 ) n 39.7 30 36.7 4 tajoule (PJ NZ$ millio Pe 20 2.32.3 2 10

00 December 2007 December 2008 Half year ended

Wholesale gas revenue Retail gas revenue Wholesale gas volumeRetail gas volume

Contact’s gas revenue from wholesale customers grew by $3 million to $39.7 million in the period ended 31 December 2008. This was largely due to increases in price, since the volume was relatively flat between the periods at 6.3 PJ compared with 6.6 PJ in the six months ended 31 December 2007. Retail gas revenue was slightly lower at $46.6 million compared with $47.1 million in the six months ended 31 December 2007. The sales volume remained flat at 2.3 PJ in the six months ended 31 December 2008. Gas customer numbers have decreased to 70,000 compared with 74,000 as at 31 December 2007 and 75,000 as at 30 June 2008. The average cost of gas (excluding transmission) increased 24 per cent from $5.34 per GJ in the six month period ended 31 December 2007 to $6.61 per GJ in the period ended 31 December 2008. This increase has been driven by a change in the underlying mix of gas used, as the use of cheaper Maui 367 legacy gas decreases and is replaced by more expensive gas, and the impact of escalation in gas prices in gas contracts within Contact’s portfolio. During the period, the Producers Price Index (PPI), which is the index used to escalate the prices under most gas contracts, increased significantly more than Contact expected. The average gas transmission cost for retail also increased by eight per cent from $10.18 per GJ to $10.96 per GJ for the six month period ended 31 December 2008. Revenue from LPG sales grew by 20.7 per cent to $85.2 million. This was in part offset by an increase in LPG cost of goods of $11.5 million. The main driver of this cost increase is the underlying purchase cost of LPG, which increased by 35 per cent from $1,164 per tonne to $1,569 per tonne in the six month period ended 31 December 2008. This was largely due to the imported cost of LPG, which tends to move with oil prices. Total LPG customers (including customers of franchisees) increased by 3,500 to 54,400 compared with 50,900 as at 31 December 2007 and 52,500 as at 30 June 2008. Total volume sold was 41,800 tonnes, a reduction of 4,200 tonnes from the six months ended 31 December 2007.

WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 12 Contact Energy Limited Half Year Report 2008

Generation segment

Variance 6 Months Ended 6 Months Ended 31 December 2008 31 December 2007 $ million $ million $ million % Wholesale Electricity Revenue 372.2 307.3 64.9 21% Steam Revenue 7.6 7.1 0.5 7% Other Wholesale Revenue 1.9 2.2 (0.3) (14%) Total Wholesale Revenue 381.7 316.6 65.1 21% Electricity Transmission, Distribution and Levies (22.6) (21.8) (0.8) (4%) Gas Purchases and Transmission (130.7) (127.2) (3.5) (3%) Labour Costs and Other Operating Expenses (50.1) (42.4) (7.7) (18%) Total Operating Expenses (203.4) (191.4) (12.0) (6%) EBITDAF 178.3 125.2 53.1 42% Depreciation (67.2) (63.1) (4.1) (6%) Segment Result 111.1 62.1 49.0 79%

Average Wholesale Electricity Price ($ per MWh) 1 72.03 48.53 23.5 48% Gas Used in Internal Generation (PJ) 18.3 22.1 (3.8) (17%) Thermal Generation (GWh) 2,214 2,821 (607) (22%) Geothermal Generation (GWh) 1,147 1,085 62 6% Hydro Generation (GWh) 1,693 1,968 (275) (14%) Total Generation (GWh) 5,054 5,874 (820) (14%)

1 This is the price received by Contact for its generation. It excludes contracts for differences.

As discussed earlier, the six months ended 31 December 2008 saw both hydrology extremes, which, together with the loss of Pole 1 of the HVDC and a loss of approximately 180 MW of demand at the Tiwai Point aluminium smelter in Southland, resulted in unprecedented volatility in the wholesale electricity market. This led to the EBITDAF contribution of the generation segment increasing by 42 per cent to $178.3 million, a $53.1 million increase over the period ended 31 December 2007. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 13

The average wholesale electricity price for the six months ended 31 December 2008 was $72.03 per MWh, a 48 per cent increase over the average wholesale price for the six months ended 31 December 2007 of $48.53 per MWh. Within the period, the prices were extremely volatile as illustrated in the table below:

6 Months Ended 6 Months Ended 31 December 2008 31 December 2007 Q1 Average North Island Wholesale Electricity Price ($/MWh) 96 54 Q2 Average North Island Wholesale Electricity Price ($/MWh) 43 44 HY1 Average North Island Wholesale Electricity Price ($/MWh) 75 49

Q1 Average South Island Wholesale Electricity Price ($/MWh) 117 56 Q2 Average South Island Wholesale Electricity Price ($/MWh) 34 40 HY1 Average South Island Wholesale Electricity Price ($/MWh) 67 47

Q1 Average National Wholesale Electricity Price ($/MWh) 101 55 Q2 Average National Wholesale Electricity Price ($/MWh) 39 42 HY1 Average National Wholesale Electricity Price ($/MWh) 72 49

During the six month period ended 31 December 2008, Contact was, on average, hedged about 93 per cent compared with 88 per cent for the period ended 31 December 2007. In respect of the South Island, in the six months ended 31 December 2008, Contact had about 23 per cent more customer demand than it generated; conversely, in the North Island, Contact was about 78 per cent hedged. In comparison, in the period ended 31 December 2007, Contact was about 105 per cent hedged in the South Island and about 78 per cent in the North Island. During December 2008, Contact was about 80 per cent hedged in the South Island reflecting the change in hydro conditions that occurred in the second quarter of the six month period ending 31 December 2008. Contact’s thermal generation for the six month period ended 31 December 2008 was 2,214 GWh, 607 GWh lower than the six months ended 31 December 2007. This was largely due to a scheduled six week outage at Contact’s Otahuhu B gas-fired power station. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 14 Contact Energy Limited Half Year Report 2008

Generation by type

6,000

5,000 1,968 1,693 4,000 h 3,000 GW 2,821 2,214 2,000

1,000 1,085 1,147 0 December 2007 December 2008 Half year ended

Geothermal generation Thermal generation Hydro generation

Contact’s geothermal generation increased six per cent or 62 GWh in the period ended 31 December 2008 to 1,147 GWh as a result of Contact’s geothermal drilling and development programme. Contact’s hydro generation at 1,693 GWh was 275 GWh less than in the six months ended 31 December 2007 due to the dry conditions in the early part of the period and the transmission constraints during November and December that limited Contact’s ability to generate.

Gas purchases for generation

25 8 $7.18 7 20

6 $5.78 ) 15 5 4 lume (PJ 22.1

Vo 10 18.3 3 $/GJ (gigajoule) 2 5 1 0 0 December 2007 December 2008 Half year ended

Gas purchased for generation (PJ) Average cost per GJ for generation (including transmission) WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited Half Year Report 2008 15

Contact used 18.3 PJ of gas in generation in the six months ended 31 December 2008, a 3.8 PJ reduction from the six months ended 31 December 2007. Despite this, the total gas cost including transmission increased by $3.5 million, resulting in an increase in the average cost of gas from $5.78 per GJ to $7.18 per GJ, a near 25 per cent increase.

Income Tax Expense Income tax for the period at $9.5 million is $37.9 million lower than for the six month period ended 31 December 2007. This is due to the profit for the period being significantly lower at $25.1 million (compared with $117.4 million) and the lower statutory tax rate of 30 per cent.

Net debt and interest expense Based on the NZD equivalent of borrowings, net of foreign exchange hedging and short term deposits, net debt as at 31 December 2008 was $1,031.1 million compared with $820.5 million as at 31 December 2007. This increase is largely due to the significant increase in growth capital expenditure as well as a reduction in cash flow from ongoing operations. As at 31 December 2008, Contact’s evergreen committed credit facilities totalled $585 million with available capacity of $295 million. Net interest expense for the period remained flat at $35.5 million. While the total debt increased, the average cost of debt was lower due to lower interest rates. In addition, interest on growth projects such as the gas-fired peaking plant is capitalised until construction is completed. In the six month period ended 31 December 2008, $4.4 million of interest has been capitalised.

Capital expenditure Contact’s capital expenditure for the six months ended 31 December 2008 was $209.4 million. Of this, $54.2 million was ‘stay in business’ and $155.2 million was growth capital expenditure. This compares with $32.8 million and $59.4 million respectively for the six months ended 31 December 2007. The increase in growth capital expenditure is primarily due to the previously announced investment in generation projects – the 23 MW Tauhara geothermal binary plant and the 200 MW gas peaking plant at Stratford. The increase in the stay in business capital expenditure is primarily due to a major inspection and plant overhaul undertaken during November and December 2008.

Outlook In January 2009, Contact provided guidance that Underlying Earnings After Tax for the 2009 financial year would be between 20 and 23 per cent lower than the 2008 financial year. Based on current market conditions, Contact remains comfortable with that guidance and current market consensus. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 16 Contact Energy Limited Half Year Report 2008

Otahuhu A National overview reactive power Contact is one of New Zealand’s largest publicly listed companies, with Otahuhu B the ability to supply electricity and gas products across the country. We combined-cycle gas turbine 400 MW have reticulated natural gas customers across much of the North Island, reticulated LPG customers in Christchurch, Queenstown and Wanaka, and can supply bottled and automotive LPG nationwide.

Auckland Sales Team Ohaaki geothermal 105 MW (currently operating at 65 MW)

Haua-uru ma- raki wind farm 540 MW (in development)

Te Rapa cogeneration 44 MW

Te Mihi geothermal 220 MW (in development) Poihipi Road geothermal 50 MW Wairakei geothermal 157 MW and 15 MW binary plant New Plymouth steam turbine 100 MW* Taranaki combined-cycle gas turbine 377 MW Stratford peaker gas-fired power station 200 MW (in construction) Tauhara geothermal phase one 23 MW (in construction) and phase two Ahuroa gas storage facility (in development) 240 MW (in development)

Waitahora wind farm 177 MW Levin Call Centre (in development)

Lower Hutt Retail Services Centre LPG Sales and Distribution

Wellington Contact Head Office

Queenstown LPG Sales and Distribution Christchurch Reticulated LPG networks LPG Sales and Distribution Reticulated LPG networks

Hawea gates hydro 17 MW (in development)

Clyde Clutha River hydro 432 MW Roxburgh Clutha River hydro 320 MW Dunedin Call Centre LPG Sales and Distribution Existing power stations

Strategic initiatives Upper/Lower Clutha River hydro 200–400 MW (in development) Offices * The process of removing asbestos from the New Plymouth Invercargill power station is continuing, and options for ongoing use of LPG Sales and Distribution the site are under review. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 17 Condensed Interim Financial Statements for the six months ended 31 December 2008

18 Income Statement 19 Statement of Changes in Equity 20 Balance Sheet 21 Statement of Cash Flows 23 Notes to the Condensed Interim Financial Statements 1 Statement of Accounting Policies 2 Underlying Earnings After Tax 3 New Plymouth Power Station 4 Sale of Mokai Geothermal Land and Rights 5 Segment Reporting 6 Net Interest Expense 7 Income Tax Expense 8 Dividends/Distributions 9 Share Capital 10 Receivables and Prepayments 11 Borrowings 12 Derivative Financial Instruments 13 Payables and Accruals 14 Provisions 15 Deferred Tax 16 Commitments 17 Remuneration Details of Directors 18 Material Related Party Transactions 19 Subsequent Events 35 Audit Report WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 18 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008

Income Statement for the six months ended 31 December 2008

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Operating Revenue Wholesale Electricity Revenue 372,177 307,272 1,147,988 Retail Electricity Revenue 679,548 641,049 1,244,326 Gas Revenue 86,281 83,774 181,520 LPG Revenue 85,182 70,567 145,233 Steam Revenue 7,609 7,068 11,038 Other Revenue 8,501 7,716 26,196 1,239,298 1,117,446 2,756,301 Operating Expenses Electricity Purchases (366,247) (225,765) (954,923) Electricity Transmission, Distribution and Levies (248,693) (245,232) (486,843) Gas Purchases and Transmission (213,105) (198,484) (412,430) LPG Purchases (65,149) (53,597) (105,207) Labour Costs (41,615) (39,861) (82,191) Other Operating Expenses (79,746) (72,580) (147,543) (1,014,555) (835,519) (2,189,137) Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation, Financial Instruments and Other Significant Items (EBITDAF) 224,743 281,927 567,164 Depreciation and Amortisation (78,060) (74,292) (146,540) Equity Accounted Earnings of Associates 1,699 1,206 2,793 Change in Fair Value of Financial Instruments 12 (78,316) 609 (1,926) Removal of New Plymouth Asbestos and Related Costs 3 – (30,497) (33,747) Gain on Sale of Mokai Geothermal Land and Rights 4 – 21,319 21,319 (154,677) (81,655) (158,101) Earnings Before Net Interest Expense and Income Tax (EBIT) 70,066 200,272 409,063 Net Interest Expense 6 (35,510) (35,469) (69,942) Profit Before Income Tax 34,556 164,803 339,121 Income Tax Expense 7 (9,498) (47,375) (102,055) Profit for the Period 25,058 117,428 237,066 Basic and Diluted Earnings Per Share (Cents) 4.35 20.36 41.11

Supplementary Disclosure Underlying Earnings After Tax is presented to allow stakeholders to make an assessment and comparison of underlying earnings after removing significant one-off items and the non-cash Change in Fair Value of Financial Instruments.

Underlying Earnings After Tax 2 79,879 116,134 232,798 Underlying Earnings Per Share (Cents) 13.85 20.14 40.37

The accompanying notes form an integral part of these condensed interim financial statements. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 19

Statement of Changes in Equity for the six months ended 31 December 2008

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Profit for the Period 25,058 117,428 237,066 Change in Foreign Currency Translation Reserve (112) 157 346 Change in Asset Revaluation Reserve (1,260) – (2,335) Change in Cash Flow Hedge Reserve 12 43,705 3,515 (74,572) Total Recognised Income and Expenses 67,391 121,100 160,505 Dividends Paid 8 (98,028) (98,028) (161,458) Share-based Payments 570 427 752 Business Combination of Commonly Controlled Entities – – 93 Changes in Equity for the Period (30,067) 23,499 (108) Equity at Start of the Period 2,904,071 2,904,179 2,904,179 Equity at End of the Period 2,874,004 2,927,678 2,904,071 Represented by: Share Capital 9 780,697 780,358 780,481 Foreign Currency Translation Reserve 284 207 396 Asset Revaluation Reserve 1,897,123 1,900,718 1,898,383 Cash Flow Hedge Reserve (30,574) 3,808 (74,279) Share-based Payment Reserve 1,081 525 727 Retained Earnings 225,393 242,062 298,363 Equity at End of the Period 2,874,004 2,927,678 2,904,071

The accompanying notes form an integral part of these condensed interim financial statements. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 20 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008

Balance Sheet as at 31 December 2008

Group Audited Group Unaudited Group Audited 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Shareholders' Equity 2,874,004 2,927,678 2,904,071 Represented by: Current Assets Cash and Short Term Deposits 13,339 16,730 2,542 Receivables and Prepayments 10 184,940 206,776 517,365 Tax Receivable 17,485 – 162 Inventories 16,647 20,796 21,111 Derivative Financial Instruments 12 25,214 5,687 13,106 Total Current Assets 257,625 249,989 554,286 Non-current Assets Property, Plant and Equipment 4,509,166 4,314,334 4,381,600 Intangible Assets 213,547 187,297 214,552 Gas Storage – Cushion Gas 23,491 – 23,622 Investment in Associates 7,940 6,833 8,015 Available-for-sale Financial Assets 2,935 2,935 2,935 Derivative Financial Instruments 12 69,458 39,913 30,611 Other Non-current Assets 7,135 5,373 5,071 Total Non-current Assets 4,833,672 4,556,685 4,666,406 Total Assets 5,091,297 4,806,674 5,220,692 Current Liabilities Borrowings 11 296,302 89,011 132,811 Derivative Financial Instruments 12 5,583 1,106 38,644 Payables and Accruals 13 203,930 217,333 540,619 Tax Payable – 11,329 – Provisions 14 15,723 30,547 20,954 Total Current Liabilities 521,538 349,326 733,028 Non-current Liabilities Borrowings 11 808,367 553,518 556,851 Derivative Financial Instruments 12 120,861 201,423 272,786 Provisions 14 34,007 27,525 33,618 Deferred Tax 15 730,450 744,752 718,462 Other Non-current Liabilities 2,070 2,452 1,876 Total Non-current Liabilities 1,695,755 1,529,670 1,583,593 Total Liabilities 2,217,293 1,878,996 2,316,621 Net Assets 2,874,004 2,927,678 2,904,071

The Directors of Contact Energy Limited authorised these condensed interim financial statements for issue. On behalf of the Board

Grant King Phillip Pryke Chairman, 23 February 2009 Deputy Chairman, 23 February 2009

Statement of Cash Flows for the six months ended 31 December 2008

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Cash Flows from Operating Activities Cash Provided from: Receipts from Customers 1,574,249 1,145,880 2,468,265 Dividends Received 2,465 1,467 3,321 1,576,714 1,147,347 2,471,586 Cash Applied to: Payments to Suppliers and Employees (1,340,109) (869,152) (1,938,986) Supplementary Dividend Paid to Shareholders 8 (10,197) (10,189) (16,790) Tax Paid (25,000) (30,400) (81,900) (1,375,306) (909,741) (2,037,676) Net Cash Inflow from Operating Activities 201,408 237,606 433,910 Cash Flows from Investing Activities Cash Provided from: Proceeds from Sale of Mokai Geothermal Land and Rights 4 – 27,252 27,252 Interest Received 1,832 4,172 5,133 Repayment of Loan to Investee – – 125 Loan from Associate – 1,051 1,051 1,832 32,475 33,561 Cash Applied to: Purchase of Property, Plant and Equipment and Intangible Assets (186,716) (98,754) (217,579) Removal of New Plymouth Asbestos and Related Costs 3 (9,573) (1,524) (11,147) Purchase of Gas Storage Rights (120) – (28,457) Purchase of Cushion Gas (23,622) – – Repayment of Loan from Associate (695) – – (220,726) (100,278) (257,183) Net Cash (Outflow) to Investing Activities (218,894) (67,803) (223,622) Cash Flows from Financing Activities Cash Provided from: Proceeds from Other Short Term Loans 11,024 6,846 6,846 Net Proceeds from Borrowings 162,500 84,421 127,500 173,524 91,267 134,346 Cash Applied to: Interest Paid (37,477) (40,710) (75,057) Ordinary Dividend Paid to Shareholders 8 (98,028) (98,028) (161,458) Repayment of Other Short Term Loans and Finance Lease Liabilities (10,052) (6,255) (7,499) Repayment of Term Borrowings – (277,778) (277,778) (145,557) (422,771) (521,792) Net Cash Inflow/(Outflow) from/(to) Financing Activities 27,967 (331,504) (387,446) Net Increase/(Decrease) in Cash and Cash Equivalents 10,481 (161,701) (177,158) Add: Cash and Cash Equivalents at Start of the Period 790 177,948 177,948 Cash and Cash Equivalents at End of the Period 11,271 16,247 790

The accompanying notes form an integral part of these condensed interim financial statements. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 22 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008

Statement of Cash Flows for the six months ended 31 December 2008 (continued)

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Cash and Cash Equivalents is comprised of: Bank Overdraft 11 (2,068) (483) (1,752) Cash and Short Term Deposits 13,339 16,730 2,542 11,271 16,247 790

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended Reconciliation of Profit for the Period 31 Dec 2008 31 Dec 2007 30 June 2008 to Cash Flows from Operating Activities Note $000 $000 $000 Profit for the Period 25,058 117,428 237,066 Items Classified as Investing/Financing Removal of New Plymouth Asbestos and Related Costs 3 – 30,497 33,747 Gain on Sale of Mokai Geothermal Land and Rights 4 – (21,319) (21,319) Net Interest Expense 6 35,510 35,469 69,942 35,510 44,647 82,370 Non-cash Items Bad and Doubtful Accounts Receivable 4,368 2,407 5,954 Movement in Provisions 565 784 917 Share-based Payments 709 530 933 Depreciation and Amortisation 78,060 74,292 146,540 Equity Accounted (Earnings) of Associates net of Dividends Received (191) (377) (939) Change in Fair Value of Financial Instruments 12 78,316 (609) 1,926 (Decrease)/Increase in Deferred Tax (5,924) 766 4,717 Other Non-cash Items (39) (364) (723) 155,864 77,429 159,325 Movement in Working Capital Decrease/(Increase) in Receivables and Prepayments 328,573 26,158 (288,044) (Increase)/Decrease in Tax Receivable (17,775) – 1,555 Decrease in Inventories 4,291 738 227 (Decrease)/Increase in Payables and Accruals (328,113) (34,814) 244,356 Increase in Tax Payable – 8,920 – (Increase) in Other Non-current Assets (2,000) (2,900) (2,945) (15,024) (1,898) (44,851) Net Cash Inflow from Operating Activities 201,408 237,606 433,910

1 Statement of Accounting Policies Reporting Entity Contact Energy Limited (the Parent) is a profit-oriented company domiciled in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Market (NZSX). The Parent is an issuer in terms of the Financial Reporting Act 1993. The audited condensed interim Group financial statements (the Group financial statements) of Contact Energy Limited as at and for the six months ended 31 December 2008 comprise the Parent and its subsidiaries, interest in associates and jointly controlled entities (together referred to as Contact or the Group). Contact is a diversified and integrated energy group, focusing on the wholesale generation of electricity and the retail sale of electricity, natural gas and liquefied petroleum gas (LPG), and related services in New Zealand. Basis of Preparation The functional and reporting currency used in the preparation of the Group financial statements is New Zealand dollars, rounded to the nearest thousand. The Group financial statements have been prepared in accordance with the New Zealand Equivalent to International Accounting Standard IAS 34 Interim Financial Reporting (NZIAS 34) and include condensed notes to the financial statements. The Group financial statements also comply with International Accounting Standard IAS 34 Interim Financial Reporting. These Group financial statements do not include all the information required for full financial statements and consequently should be read in conjunction with the financial statements and related notes included in Contact’s Annual Report for the year ended 30 June 2008 (2008 Annual Report). The accounting policies set out in the 2008 Annual Report have been applied consistently to all periods presented in these financial statements. There have been no changes in accounting policies from those applied in the 2008 Annual Report. In June 2008 and December 2008 certain presentational changes have been made which have been reflected in all comparative information included in these condensed interim financial statements. The periods impacted by the changes are shown in brackets below. A presentational change has been made to the comparative Statements of Cash Flows to allow stakeholders to make a more appropriate assessment of the Group’s sustainable operating cash flows before funding costs. This change, which has been applied retrospectively relates to: • Reclassification of Associate Dividends Received from Investing Activities to Operating Activities (31 December 2007). A presentational change has been made to the comparative Statements of Cash Flows to allow stakeholders to make a more appropriate assessment of proceeds from and repayments to Borrowings. These changes, which have been applied retrospectively relate to: • Reclassification of Proceeds from Other Short Term Loans from Net Proceeds from Borrowings (31 December 2007 and 30 June 2008) • Reclassification of Repayment of Other Short Term Loans and Finance Lease Liabilities from Repayment of Term Borrowings (31 December 2007 and 30 June 2008). Certain presentational changes have been made to the comparative Balance Sheets and related notes to ensure consistency with current period treatment. These changes, which have been applied retrospectively, relate to: • Reclassification of computer software from Property, Plant and Equipment to Intangible Assets (31 December 2007) • Reclassification of credit balances held by the Group from receivables to payables (where no contractual right of set-off is available) (31 December 2007) • Presentation of Derivative Financial Instruments – individual derivative financial assets and liabilities are offset where there is a legally enforceable right to set-off the recognised amounts and there is the intention to settle simultaneously (31 December 2007 and 30 June 2008). Adoption Status of Relevant New Financial Reporting Standards and Interpretations The Group has chosen to early adopt the revised NZIAS 23 Borrowing Costs, NZIAS 27 Consolidated and Separate Financial Statements (amended), and Amendments to NZIAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items. The Group has elected not to early adopt the following standards, considered relevant to the Group financial statements, which have been issued but are not yet effective: WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 24 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

• NZIFRS 2 Share-based Payments – revisions approved February 2008 and effective for annual reporting periods beginning on or after 1 January 2009. • NZIFRS 8 Operating Segments – approved December 2006 and effective for annual reporting periods beginning on or after 1 January 2009. • NZIAS 1 Presentation of Financial Statements – revisions approved September 2007 and effective for annual reporting periods beginning on or after 1 January 2009. • NZIFRS 3 Business Combinations – revisions approved June 2007 and effective for annual reporting periods beginning on or after 1 July 2009. The Group does not currently intend to early adopt any of these standards before their effective date. The adoption of these standards is not expected to have a material impact on the recognition and measurement of the Group’s assets, liabilities, income and expenses. Accounting Estimates and Judgements The preparation of the Group financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The Group’s significant areas of estimation and critical judgements in these financial statements are summarised below: Derivative Financial Instruments Generation Plant and Equipment Intangible Assets – Gas Storage Rights Intangible Assets – Goodwill Provisions – New Plymouth Power Station Provisions – Restoration and Environmental Rehabilitation Retail Revenue. This list is consistent with that set out in the 2008 Annual Report. 2 Underlying Earnings After Tax Underlying Earnings After Tax is presented to allow stakeholders to make an assessment and comparison of underlying earnings after removing significant one-off items and the non-cash Change in Fair Value of Financial Instruments.

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 Note $000 $000 $000 Profit for the Period 25,058 117,428 237,066 Change in Fair Value of Financial Instruments 12 78,316 (609) 1,926 Removal of New Plymouth Asbestos and Related Costs 3 – 30,497 33,747 Gain on Sale of Mokai Geothermal Land and Rights 4 – (21,319) (21,319) Gain on Disposal of Fuel Oil Reserves* 3 – – (9,613) Adjustments Before Income Tax 78,316 8,569 4,741 Change in Income Tax Expense in Relation to Adjustments** (23,495) (9,863) (8,600) Change in Corporate Income Tax Rate – – (409) Adjustments After Income Tax 54,821 (1,294) (4,268) Underlying Earnings After Tax 79,879 116,134 232,798

* Gain on Disposal of Fuel Oil Reserves is included in Other Revenue, a component of EBITDAF. ** Tax has been applied at 30 per cent (31 December 2007 and 30 June 2008: 33 per cent) for all adjustments except for the Gain on Sale of Mokai Geothermal Land and Rights, which is non-taxable.

WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 25

Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

3 New Plymouth Power Station In December 2007, the Group announced the decommissioning of its 31-year-old New Plymouth power station following the discovery of asbestos in areas of the station where it was not previously recorded on the station’s asbestos register. In May 2008, the Group announced the recommissioning of one 100 megawatt gas-fired generator unit in response to tight electricity supply conditions over the winter period. The financial impact of the decision to decommission the plant was recorded in the twelve months ended 30 June 2008 and was an expense of $33.7 million. This expense principally represented an estimate ($30.5 million at 31 December 2007) of the cost to remove asbestos at the plant and other related costs, including a $1.5 million write-down in inventory. These costs were not impacted by the recommissioning of the one generator unit and remain consistent with the estimated cost at 31 December 2008. No impairment of the New Plymouth asset has been recorded on the basis that the recoverable amount of the asset, based on an assessed fair value less costs to sell, exceeds the carrying amount. The Group held reserves of fuel oil at New Plymouth. These reserves were sold for $20.3 million, and a gain on disposal of $9.6 million was recorded in Other Revenue during the twelve months ended 30 June 2008. The Group has entered into arrangements in the wholesale electricity market that are expected to provide a broadly equivalent degree of flexibility to that provided by the operation of the New Plymouth power station. These are accounted for as cash flow hedges.

4 Sale of Mokai Geothermal Land and Rights In November 2007, the Group sold geothermal land and rights relating to the Mokai geothermal field, north of Taupo, to Mighty River Power and the Tuaropaki Trust. The Group received $27.2 million for the sale of the Mokai land and rights, giving rise to a non-taxable gain of $21.3 million.

5 Segment Reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services in a particular economic environment, where the risks and returns are different from those of segments operating in other economic environments. The Group's primary reporting format is business segments. All business segments are fully integrated within New Zealand. The Group comprises the following main business segments: Retail The Retail segment encompasses any activity that is associated with the Group’s supply of energy to end user customers as well as related services. Generation The Generation segment encompasses any activity that is associated with the Group’s generation of electricity or steam and the Group’s sales to the wholesale electricity market. It also includes all activities in relation to the gas storage facility at the Ahuroa reservoir. The segment result includes items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Wholesale electricity purchase costs for the Retail segment are based on spot prices prevailing in the New Zealand wholesale electricity market at the relevant time and at the relevant grid exit purchase node. Similarly, the revenues received by the Generation segment are determined by the spot prices received at the relevant grid injection points. The cost of gas purchases across the portfolio is allocated between the segments in proportion to consumption. Gas transmission and distribution charges are allocated to the segments within which they are incurred. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 26 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

Group Audited Retail Generation Total For the six months ended 31 December 2008 $000 $000 $000 Segment Revenue 857,596 381,702 1,239,298 EBITDAF 46,437 178,306 224,743 Depreciation and Amortisation of Segment Assets (10,825) (67,235) (78,060) Segment Result 35,612 111,071 146,683 Equity Accounted Earnings of Associates 1,699 Change in Fair Value of Financial Instruments (78,316) Net Interest Expense (35,510) Income Tax Expense (9,498) Profit for the Period 25,058

Group Unaudited Retail Generation Total For the six months ended 31 December 2007 $000 $000 $000 Segment Revenue 800,766 316,680 1,117,446 EBITDAF 156,761 125,166 281,927 Depreciation and Amortisation of Segment Assets (11,206) (63,086) (74,292) Segment Result 145,555 62,080 207,635 Equity Accounted Earnings of Associates 1,206 Change in Fair Value of Financial Instruments 609 Removal of New Plymouth Asbestos and Related Costs (30,497) Gain on Sale of Mokai Geothermal Land and Rights 21,319 Net Interest Expense (35,469) Income Tax Expense (47,375) Profit for the Period 117,428

Group Audited Retail Generation Total For the twelve months ended 30 June 2008 $000 $000 $000 Segment Revenue 1,582,551 1,173,750 2,756,301 EBITDAF (263,561) 830,725 567,164 Depreciation and Amortisation of Segment Assets (20,264) (126,276) (146,540) Segment Result (283,825) 704,449 420,624 Equity Accounted Earnings of Associates 2,793 Change in Fair Value of Financial Instruments (1,926) Removal of New Plymouth Asbestos and Related Costs (33,747) Gain on Sale of Mokai Geothermal Land and Rights 21,319 Net Interest Expense (69,942) Income Tax Expense (102,055) Profit for the Period 237,066 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 27

Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

6 Net Interest Expense

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 $000 $000 $000 Interest Expense 41,945 40,407 76,687 Interest Expense Capitalised (4,409) (768) (1,617) Interest Income (2,026) (4,170) (5,128) Net Interest Expense 35,510 35,469 69,942

The Group commenced capitalising interest from 1 July 2007, principally in respect of expenditure categorised as Development Capital Work in Progress. The weighted average capitalisation rate on funds borrowed is 8.0 per cent per annum (31 December 2007 and 30 June 2008: 8.0 per cent).

7 Income Tax Expense The Income Tax Expense for the six months ended 31 December 2008 reflects an effective income tax rate of 27.5 per cent (31 December 2007: 28.7 per cent and 30 June 2008: 30.1 per cent). The effective income tax rate at 31 December 2008 for the Group differs from the statutory rate of 30.0 per cent principally due to prior period adjustments. In determining the effective income tax rate, an income tax rate of 30.0 per cent has been applied to all other interim period taxable income. The effective income tax rate for the Group differs from the statutory rate of 33.0 per cent at 31 December 2007 and 30 June 2008 principally due to the non-taxable Gain on Sale of Mokai Geothermal Land and Rights realised in the period. In determining the effective tax rate, different income tax rates were applied to different categories of income of the period. A tax rate of zero per cent was applied to the non-taxable Gain on Sale of Mokai Geothermal Land and Rights. A tax rate of 33.0 per cent was applied to all other income. The effective income tax rate is expected to be approximately 29.7 per cent for the twelve months ending 30 June 2009 (30 June 2008: 30.1 per cent).

8 Dividends/Distributions The Parent paid the following fully imputed dividends during the period.

Audited Unaudited Audited Dividend 6 Months Ended 6 Months Ended 12 Months Ended Payment Cents per 31 Dec 2008 31 Dec 2007 30 June 2008 Date Share $000 $000 $000 2007 Year Final Dividend 25 September 2007 17.0 – 98,028 98,028 2008 Year Interim Dividend 26 March 2008 11.0 – – 63,430 2008 Year Final Dividend 23 September 2008 17.0 98,028 – – Supplementary Dividend 10,197 10,189 16,790 Foreign Investor Tax Credit (10,197) (10,189) (16,790) Total Dividends Paid 98,028 98,028 161,458

Subsequent to balance sheet date, the Board of Directors (the Board) announced the first bonus issue under the new distribution plan equivalent to 11.0 cents per share. Refer to Note 19. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 28 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

9 Share Capital 104,712 restricted ordinary shares were issued on 11 November 2008, pursuant to the Group’s Employee Long Term Incentive Scheme and are held in trust. 83,242 restricted ordinary shares were issued on 31 October 2007, pursuant to the Group’s Employee Long Term Incentive Scheme and are held in trust. 3,091 restricted ordinary shares were issued on 25 February 2008, pursuant to the Group’s Employee Long Term Incentive Scheme and are held in trust. As at 31 December 2008, 24,159 (31 December 2007: 1,156; 30 June 2008: 10,667) restricted shares were held by the Trustee in the unallocated pool.

10 Receivables and Prepayments Average wholesale electricity sales prices per megawatt hour that the Group received for its generation in June 2008 ($106.90) were considerably higher than the 31 December 2008 ($72.03) and 31 December 2007 ($48.53) prices due to national hydro storage conditions. Consequently, Receivables and Prepayments are higher at 30 June 2008.

11 Borrowings Carrying Value of Borrowings

Borrowing Group Audited Group Unaudited Group Audited Currency 31 Dec 2008 31 Dec 2007 30 June 2008 Current Borrowings Denomination $000 $000 $000 Bank Overdraft NZD 2,068 483 1,752 Commercial Paper NZD – 54,421 – Committed Credit Facilities NZD 290,000 30,000 100,000 Other Credit Facilities NZD – – 27,500 Loan from Associate AUD 2,085 2,579 2,839 Other Short Term Loans NZD 1,375 856 – Finance Lease Liabilities NZD 774 672 720 Total Current Borrowings 296,302 89,011 132,811 Non-current Borrowings Fixed Rate Senior Notes USD 807,814 552,798 556,247 Finance Lease Liabilities NZD 553 720 604 Total Non-current Borrowings 808,367 553,518 556,851 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 29

Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

New Zealand Dollar Equivalent of USD Borrowings The New Zealand dollar equivalent of USD Borrowings (Fixed Rate Senior Notes) after the effect of the foreign exchange hedging totals $747.5 million (31 December 2007: $747.5 million; 30 June 2008: $747.5 million) as presented in the table below. The USD denominated term Fixed Rate Senior Notes are hedged by Cross Currency Interest Rate Swaps. Refer to Note 12.

Group Audited Group Unaudited Group Audited 31 Dec 2008 31 Dec 2007 30 June 2008 $000 $000 $000 Carrying Value of Fixed Rate Senior Notes 807,814 552,798 556,247 Net Fair Value Adjustments due to Market Price Movements Subsequent to Issuance (60,287) 194,729 191,280 New Zealand Dollar Equivalent of USD Borrowings 747,527 747,527 747,527

Security Except for finance leases, the Group’s Borrowings are unsecured. The Group borrows under a negative pledge arrangement, which does not permit the Group to grant any security interest over its assets, unless it is an exception permitted within the negative pledge arrangements. All borrowing covenants requirements were met during the period. Credit Facilities The Group has total evergreen committed facilities at 31 December 2008 of $585.0 million (31 December 2007: $510.0 million; 30 June 2008: $585.0 million). As at 31 December 2008, $360.0 million of the facilities matures in May 2010, $75.0 million matures in May 2011, and $150.0 million matures in December 2012. At 31 December 2008, $290.0 million (31 December 2007: $30.0 million; 30 June 2008: $100.0 million) was drawn against these facilities. These Committed Credit Facilities also support a $250.0 million commercial paper programme. This programme was unutilised at 31 December 2008 (31 December 2007: $54.4 million; 30 June 2008: unutilised). WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 30 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

12 Derivative Financial Instruments Fair Value of Derivative Financial Instruments The fair value of the significant types of Derivative Financial Instruments outstanding, together with the designation of their hedging relationship, is summarised below:

Group Fair Group Fair Group Fair Group Fair Value Group Fair Value Group Fair Value Value Assets Liabilities Value Assets Liabilities Value Assets Liabilities Audited Audited Unaudited Unaudited Audited Audited Hedge Accounting 31 Dec 2008 31 Dec 2008 31 Dec 2007 31 Dec 2007 30 June 2008 30 June 2008 Designation $000 $000 $000 $000 $000 $000 Cross Currency Interest Rate Swaps Fair Value Hedge 60,233 (435) – (194,637) – (191,255) Interest Rate Derivatives No Hedge 6 (55,786) 29,468 (177) 14,180 (723) Cross Currency Interest Rate Swaps – Margin Cash Flow Hedge 1,893 (121) – (6,354) – (6,592) Forward Foreign Exchange Derivatives Cash Flow Hedge 28,738 (1,334) 367 (1,066) 4,113 (283) Forward Foreign Exchange Derivatives No Hedge – – – – – (56) Electricity Price Hedges Cash Flow Hedge 2,655 (67,436) 15,332 – 15,319 (111,399) Electricity Price Hedges No Hedge 1,147 (1,332) 433 (295) 10,105 (1,122) Total Derivative Financial Instruments 94,672 (126,444) 45,600 (202,529) 43,717 (311,430) Disclosed as: Current 25,214 (5,583) 5,687 (1,106) 13,106 (38,644) Non-current 69,458 (120,861) 39,913 (201,423) 30,611 (272,786) 94,672 (126,444) 45,600 (202,529) 43,717 (311,430) WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 31

Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

The Change in the Fair Value of Financial Instruments recognised in the Income Statement and Cash Flow Hedge Reserve are summarised below:

Group Cash Group Cash Group Cash Group Income Flow Hedge Group Income Flow Hedge Group Income Flow Hedge Statement Reserve Statement Reserve Statement Reserve Audited Audited Unaudited Unaudited Audited Audited 6 Months 6 Months 6 Months 6 Months 12 Months 12 Months Ended Ended Ended Ended Ended Ended Hedge Accounting 31 Dec 2008 31 Dec 2008 31 Dec 2007 31 Dec 2007 30 June 2008 30 June 2008 Favourable/(Unfavourable) Designation $000 $000 $000 $000 $000 $000 Cross Currency Interest Rate Swaps Fair Value Hedge 251,052 – 120,935 – 124,317 – Borrowings Fair Value Hedge (251,566) – (120,999) – (124,448) – (514) – (64) – (131) – Interest Rate Derivatives No Hedge (69,694) 457 470 400 (15,767) 802 Cross Currency Interest Rate Swaps – Margin Cash Flow Hedge 977 7,386 155 2,209 349 1,778 Forward Foreign Exchange Derivatives Cash Flow Hedge – 23,573 – 3,807 – 8,336 Forward Foreign Exchange Derivatives No Hedge 56 – – – (56) – Electricity Price Hedges Cash Flow Hedge 27 31,273 21 (1,170) 4,807 (117,366) Electricity Price Hedges No Hedge (9,168) – 27 – 8,872 – Income Tax on Changes in Fair Value of Financial Instruments Taken to Equity – (18,984) – (1,731) – 31,878 Total Change in Fair Value of Financial Instruments (78,316) 43,705 609 3,515 (1,926) (74,572)

The ($78.3) million (31 December 2007: $0.6 million; 30 June 2008: ($1.9) million) non-cash Change in Fair Value of Financial Instruments recorded in the Income Statement is principally due to Interest Rate Derivatives, which have not been designated in a hedge relationship. The Interest Rate Derivatives are revalued applying market interest rates. The Change in Fair Value of Interest Rate Derivatives is a non-cash item that fluctuates over time in accordance with changes in market interest rates. The movement in the Electricity Price Hedge is due to the volatility in the forecast market price path. The Income Statement movement represents the fair value movement of the Group’s unhedged market-traded electricity instruments. Movement in the Cash Flow Hedge Reserve represents the fair value movement of the electricity instruments placed in a hedged relationship. The movement in the Cash Flow Hedge Reserve in relation to hedged Forward Foreign Exchange Derivatives is due to the volatility in the forward foreign exchange market rates, which fluctuate over time. 13 Payables and Accruals The purchase price that the Group paid for electricity to supply its customers increased considerably in June 2008 as wholesale prices averaged $335.24 per megawatt hour. Consequently, Payables and Accruals are higher than at 31 December 2008 and 31 December 2007 when average wholesale purchase prices for the month were $30.34 and $63.05 per megawatt hour respectively. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 32 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

14 Provisions

Restoration/ Environmental New Plymouth Rehabilitation Other Total Group Audited $000 $000 $000 $000 Balance at 1 July 2008 18,837 33,259 2,476 54,572 Provisions Made During the Period – 2,644 401 3,045 Provisions Used During the Period (8,326) (818) (390) (9,534) Unwind of Discount Rate – 1,579 68 1,647 Balance at 31 December 2008 10,511 36,664 2,555 49,730 Current 10,511 4,267 945 15,723 Non-current – 32,397 1,610 34,007 10,511 36,664 2,555 49,730

Refer to Note 3 for discussion on the provision for removal of asbestos at New Plymouth Power Station. Cash outflows are principally expected to occur by 30 June 2009. The Restoration and Environmental Rehabilitation provisions include estimates of future expenditures for the abandonment and restoration of areas from which natural resources are extracted and the expected cost of environmental rehabilitation of commercial sites that require remediation of conditions resulting from present operations. Cash outflows are typically expected to coincide with the end of the useful life of the assets employed on the site. Other provisions cover a range of commercial matters, that are the subject of legal privilege and/or confidentiality arrangements. 15 Deferred Tax The Group holds its Property, Plant and Equipment on capital account for income tax purposes. Where the Generation Plant and Equipment and Generation Capital Work in Progress are revalued, and there is no similar adjustment to the tax base, a taxable temporary difference is created that is recognised in Deferred Tax. The Deferred Tax liability on these revaluations would not crystallise under existing income tax legislation if the assets were to be sold at the balance sheet date. At 31 December 2008, the amount of Deferred Tax relating to the revaluation of Generation Plant and Equipment and Generation Capital Work in Progress was $549.0 million (31 December 2007: $576.1 million; 30 June 2008: $563.5 million). 16 Commitments

Group Audited Group Unaudited Group Audited 6 Months Ended 6 Months Ended 12 Months Ended 31 Dec 2008 31 Dec 2007 30 June 2008 $000 $000 $000 Capital and Investment Commitments 250,131 154,057 263,724 Operating Lease Commitments 31,925 19,444 32,058 Other Operating Commitments 15,468 17,951 15,134

Other Operating Commitments comprise a portion of long term maintenance agreements entered into for generation assets, with the remainder of commitments under these agreements included in Capital and Investment Commitments. The majority of the Operating Lease Commitments are for building accommodation. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 33

Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

Gas Commitments The Group holds contracts with a variety of counterparties relating to the right to uplift and transport gas. The nature of these commitments was disclosed in the 2008 Annual Report. The principal change to these commitments as at 31 December 2008 was an additional contract entered into as disclosed below: On 30 July 2008, the Group entered into a new gas sale agreement with OMV New Zealand Limited for the supply of an additional 32 petajoules of natural gas from the Pohokura gas field. This supply will commence at the completion of the existing arrangement with OMV on 31 March 2012 and will terminate on 31 December 2013.

17 Remuneration Details of Directors Details of the total remuneration and the value of other benefits paid to (or accrued for) each director of the Group are as follows:

Group Audited For the six months ended 31 December 2008 Board Fees Committee Fees Total Remuneration * Director ** Position $ $ $ G King Chairman 100,000 – 100,000 P Pryke Deputy Chairman 75,000 – 75,000 B Beeren Director 50,000 13,500 63,500 J Milne Director 50,000 25,000 75,000 K Moses Director 50,000 – 50,000 T Saunders Director 50,000 14,075 64,075 Total 375,000 52,575 427,575

Group Unaudited For the six months ended 31 December 2007 Board Fees Committee Fees Total Remuneration * Director Position $ $ $ G King Chairman – – – P Pryke Deputy Chairman 75,000 214,815 289,815 B Beeren Director 50,000 13,500 63,500 J Milne Director 50,000 25,000 75,000 K Moses Director – – – T Saunders Director 50,000 14,075 64,075 Total 225,000 267,390 492,390 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 34 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 Notes to the Condensed Interim Financial Statements for the six months ended 31 December 2008

Group Audited For the twelve months ended 30 June 2008 Board Fees Committee Fees Total Remuneration * Director Position $ $ $ G King Chairman – – – P Pryke Deputy Chairman 150,000 214,815 364,815 B Beeren Director 100,000 27,000 127,000 J Milne Director 100,000 50,000 150,000 K Moses Director – – – T Saunders Director 100,000 28,150 128,150 Total 450,000 319,965 769,965

* Pursuant to Contact’s constitution, directors are not entitled to any payment in connection with their retirement or cessation of office. ** Remuneration payable to Origin associated Directors Grant King, Bruce Beeren and Karen Moses is paid to them in their individual capacities and complies with the NZX waiver dated 12 May 2008.

18 Material Related Party Transactions Rockgas Limited undertook transactions with Origin Energy LPG Limited, Origin Energy Contracting Limited and Origin Energy Industries Limited, all entities within the Origin Energy Group, in respect of the purchase and shipping of LPG. The transactions are calculated at arm’s length. During the six months ended 31 December 2008, transactions totalled $24.0 million (31 December 2007: $20.0 million; 30 June 2008: $52.3 million). At 31 December 2008, no amount remained outstanding (31 December 2007: Nil; 30 June 2008: $6.0 million). On 12 June 2008, Contact’s ultimate parent company, Origin Energy Limited (Origin), acquired certain New Zealand oil and gas assets from Swift Energy New Zealand Limited for approximately $110.0 million. Among these assets was a petroleum mining licence (PML) to an area that includes the Ahuroa reservoir. The Group paid $52.0 million of the total purchase price to Origin, effectively in exchange for a beneficial interest in the PML as it relates to the Ahuroa reservoir and the gas and LPG reserves contained therein. The Group intends to develop the Ahuroa field as an underground gas storage facility.

19 Subsequent Events On 23 February 2009, the Board approved the introduction of a profit distribution plan which issues fully paid non-taxable bonus shares. As part of the distribution plan, the Parent will provide a buy back facility to give all shareholders the opportunity to sell the bonus shares issued back to the Parent for cash. Shareholders electing to sell their bonus shares back to the Parent under the off-market buy back facility will be treated as having received a dividend and will receive the cash equivalent with imputation credits attached. The Board announced the first bonus issue under the new plan equivalent to 11.0 cents per share for shares on issue at 10 March 2009 the record date, with bonus shares allotted, and/or cash distributed (if elected) on 31 March 2009. On 23 February 2009, the Board approved the registration of a prospectus by the Parent to raise unsubordinated and unsecured debt in the New Zealand retail debt market. An Investment Statement will be available once the offer opens. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008 35

Audit Report To the shareholders of Contact Energy Limited

We have audited the condensed interim financial statements (the financial statements) on pages 18 to 34. The financial statements provide information about the past financial performance and financial position of Contact Energy Limited and its subsidiaries (“the Group”) as at 31 December 2008. This information is stated in accordance with the accounting policies referred to on pages 23 to 24.

Directors’ responsibilities The Directors are responsible for the preparation of the financial statements which give a true and fair view of the financial position of the Group as at 31 December 2008 and the results of the operations and cash flows for the six month period ended on that date.

Auditors’ responsibilities It is our responsibility to express an independent opinion on the financial statements presented by the Directors and report our opinion to you.

Basis of opinion An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing: • the significant estimates and judgements made by the Directors in the preparation of the financial statements; • whether the accounting policies are appropriate to the Groups circumstances, consistently applied and adequately disclosed. We conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Our firm has also provided other assurance services to the Group. Partners and employees of our firm also deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired our independence as auditors of the Group. The firm has no other relationship with or interest in the Group.

Unqualified opinion We have obtained all the information and explanations we have required. WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 36 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2008

In our opinion: • proper accounting records have been kept by the Group as far as appears from our examination of those records; • the financial statements on pages 18 to 34: – comply with New Zealand generally accepted accounting practice for condensed interim financial statements; – give a true and fair view of the financial position of the Group as at 31 December 2008 and the results of the operations and cash flows for the six month period ended on that date. Our audit was completed on 23 February 2009 and our unqualified opinion is expressed as at that date.

Wellington WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925 Internet: www.contactenergy.co.nz Address: PO Box 10742 Email: [email protected] The Terrace Telephone: (04) 499 4001 Wellington 6143

Fax: (04) 499 4003 New Zealand WorldReginfo - 58f5f985-fa4a-4b7f-a452-8c14d201d925