Infratil Update March 1999

MARCH 1999 www.infratil.co.nz

This is the tenth "Infratil Update" prepared by the Company to inform shareholders about recent developments

involving Infratil and the infrastructure industry in New Zealand. This issue outlines recent developments at

TrustPower and introduces Alliant International New Zealand Limited and Lend Lease Corporation.

Over the last 9 months, following the sale of its network The Act requires the operational separation of lines and business, TrustPower has expanded its generation and supply business activities by 1 July 1999 and ownership retail assets through a series of acquisitions and is now separation by 1 January 2004. a significant company in these sectors of the New Zealand TrustPower elected to sell its lines business along with its electricity industry. contracting business, PowerLink Limited. Following a competitive sales process, TrustPower sold its lines Why did TrustPower sell its lines business? business to United Networks Limited (formerly Power In early 1998, the Minister of Energy expressed concern New Zealand) for $485 million. Infratil supported this that the structure of the electricity industry was not decision and considers that TrustPower obtained a very conducive to competition. As a result, consumers were satisfactory price. not perceived to be benefiting from falling wholesale TrustPower remained in the supply business because it electricity prices and the efficiencies from earlier reforms. believes that it can maximise returns to shareholders In response the Government passed the Electricity Industry through its diverse, low cost generation assets and its Reform Act 1998 (the "Act"). expertise in the wholesale electricity market and retail The Act modified the electricity industry in three major energy marketing. In addition, the supply business is a respects: sector where new opportunities were likely to emerge over 1. Mandatory operational and ownership separation of the next three to five years with the split and, ultimately the lines and supply businesses1, primarily to ensure privatisation of ECNZ. open access to distribution networks for all retailers; 2. Re-emphasis on the regulatory right to impose price 1 An electricity supply business is defined as a business that restraint on line charges; and sells electricity in New Zealand; sells financial hedges for risks 3. Promotion of choice for customers from competing relating to the price of electricity in New Zealand; generates electricity in New Zealand; or trades in rights to sell or generate electricity retailers. electricity in New Zealand.

Infrastructure & Utilities NZ Limited What is TrustPower's core business after the During the last twelve months TrustPower has acquired Infratil increases its stake in TrustPower Who is Alliant International New Zealand Limited? sale of the lines business? the following generation schemes: In February Infratil announced that it had acquired 23.6 Capacity Output TrustPower's core business is the production, trading and million convertible notes in TrustPower from the Rotorua MW GWh pa retailing of electricity. The Company has 422MW of South Island Schemes Electricity Consumer Trust ("RECT"). The acquisition took renewable generation capacity that produces on average Coleridge 46.5 300.0 Infratil's stake in TrustPower from 21.7% to 33.6% on a 1,770GWh of electricity per annum. TrustPower also has Waipori 82.0 220.0 diluted basis. Infratil's shareholders' agreement with RECT a wholesale trading operation that gives it the capability Arnold, Kumara, Wahapo and others 20.0 104.0 has now terminated. Alliant is a wholly owned subsidiary of Alliant Energy to sell its own electricity, buy electricity from other Highbank and Montalto 28.0 100.0 In a separate, but related transaction, Infratil announced Corporation, based in Cedar Rapids, Iowa. Alliant Energy generators and trade supply contracts and pricing hedges Paerau and Patearoa 12.0 67.0 the sale of 15.4 million of these convertible notes to Alliant Corporation was formed last year through the merger of in the wholesale market. The combination of significant Branch and Waihopai 13.5 66.0 International New Zealand Limited ("Alliant"), formerly three neighbouring US energy companies - IES Utilities generation capability and the wholesale trading operation Total South Island 202.0 857.0 known as IES. serving Iowa, Interstate Power Company serving northern is the key to TrustPower being able to profitably deliver Iowa, southern Minnesota and Illinois, and Wisconsin North Island low cost energy in an increasingly competitive environment. Power & Light Company, serving Wisconsin and parts Matahina 72.0 295.0 Beyond the production and wholesale trading operations, 1 of Illinois. Patea and others 40.8 170.0 2 TrustPower now has over 210,000 domestic and wholesale Alliant Energy Corporation generates and markets electric Tararua Wind Farm 31.7 137.0 3 customers spread throughout New Zealand, having 4 Kaimai energy from 18 generating facilities with a total output of 5 Total North Island 144.5 602.0 3 8 acquired over 115,000 retail customers (see map below) 6 Wheao nearly 5,000 MW, enough to light 1.5 million homes. It has 11 Matahina TrustPower's existing generation 75.0 310.0 12 during the last 12 months. In addition, the retailing business 7 9 10 more than 850,000 electricity customers and 360,000 13 14 Wheao TrustPower's total generation 421.5 1,769.0 18 Hinemaiaia has the TrustPower brand, call centre and back office Patea etc 17 15 natural gas customers and approximately 6,000 employees. 19 16 Windfarm support systems. TrustPower is well positioned in the 21 20 Assets to year-end 1997 exceeded $US5 billion. 25 22 TrustPower's hydro generation (currently representing over 28 23 24 market, it has a head start in retaining and winning 27 An integral part of Alliant Energy Corporation's success 90% of TrustPower's estimated total annual output), West Coast 26 customers from its experience and culture of competitive Marlborough 30 is its joint venture, Cargill-Alliant Energy. This is an consists of 10 different schemes all located in different 29 Coleridge 31 customer service. 32 Highbank etc organisation that combines the world class commodity watersheds in both islands (see the map below). The 33 and risk management expertise of Cargill with Alliant's TrustPower's generation capacity has increased benefit of this spread is a comparatively low hydrology 35 34 Paerau 38 energy trading expertise. Alliant-Cargill buys, sells and by a factor of four! risk and an opportunity for TrustPower to take advantage 36 37 Waipori trades electricity across the entire United States. Over the last 12 months TrustPower has, through of regional price differentials. In addition, TrustPower now Alliant brings specific skills to the retailing and generation acquisitions, increased its generation capacity from 75MW has sufficient reservoir storage that will allow it to obtain side of the electricity business with extensive experience to 422MW. TrustPower's annual output is now estimated peak period prices. in providing economically priced energy to low population at 1,770GWh per annum which makes it the third largest density areas similar to New Zealand. publicly listed generator. Following these transactions, TrustPower is owned as Alliant and Infratil's relationship has developed for some follows: months, finally leading to a formal arrangement to invest Fully Diluted together in the New Zealand electricity sector. The key NORTH ISLAND Shareholding 1 terms of this arrangement are for: 1 Top Energy 13 King Country Energy Infratil 25.8% 2 2 Northpower 14 Wairoa Power 1. Infratil and Alliant to jointly pursue investments in the 3 Power New Zealand 15 Hawke's Bay Power 3 Alliant International New Zealand 8.6% 4 Mercury Energy 16 CHB Power 4 electricity sector with Infratil having an option to hold 5 Counties Power 17 Powerco 5 3 8 Tauranga Energy Consumer Trust 22.7% 6 WEL Energy 18 Egmont Electricity 6 11 60% of any joint investment; 7 TrustPower 19 CentralPower Tauranga District Council 7.6% 12 9 8 Tauranga Electricity 20 ScanPower 7 10 9 Bay of Plenty Electricity 21 Electro Power 13 14 2. The joint investment in TrustPower is to be maintained; 18 The Australian Gas Light Company 7.2% 10 Eastland Energy 22 Electra 17 15 11 Waipa Power 23 TransAlta 3. Infratil and Alliant have pre-emptive rights and/or rights 19 16 Rotorua Energy Charitable Trust 4.2% 12 Waitomo Energy Services 24 Wairarapa Electricity 21 20 25 22 of first refusal over joint investments and investment 28 Other minority shareholders 23.9% 23 24 27 26 Total 100.0% opportunities. 30 For more information, visit Alliant's Internet Site, which 29 31 32 SOUTH ISLAND can be accessed via Infratil's Internet Site. 33 Infratil and Alliant together own 34.4% of TrustPower. 25 Citipower 32 Electricity Ashburton 35 34 26 Marlborough Electric 33 Alpine Energy Whilst this transaction meant the end to a long relationship 38 27 Tasman Energy 34 Waitaki Power 36 37 28 Buller Electricity 35 Central Electric with the RECT, it signals a new and rewarding period in 29 Westpower 36 Otago Power 30 MainPower 37 Dunedin Electricity which Infratil and Alliant will work together supporting 31 Southpower 38 PowerNet TrustPower growing and maximising shareholder value. What is TrustPower's core business after the During the last twelve months TrustPower has acquired Infratil increases its stake in TrustPower Who is Alliant International New Zealand Limited? sale of the lines business? the following generation schemes: In February Infratil announced that it had acquired 23.6 Capacity Output TrustPower's core business is the production, trading and million convertible notes in TrustPower from the Rotorua MW GWh pa retailing of electricity. The Company has 422MW of South Island Schemes Electricity Consumer Trust ("RECT"). The acquisition took renewable generation capacity that produces on average Coleridge 46.5 300.0 Infratil's stake in TrustPower from 21.7% to 33.6% on a 1,770GWh of electricity per annum. TrustPower also has Waipori 82.0 220.0 diluted basis. Infratil's shareholders' agreement with RECT a wholesale trading operation that gives it the capability Arnold, Kumara, Wahapo and others 20.0 104.0 has now terminated. Alliant is a wholly owned subsidiary of Alliant Energy to sell its own electricity, buy electricity from other Highbank and Montalto 28.0 100.0 In a separate, but related transaction, Infratil announced Corporation, based in Cedar Rapids, Iowa. Alliant Energy generators and trade supply contracts and pricing hedges Paerau and Patearoa 12.0 67.0 the sale of 15.4 million of these convertible notes to Alliant Corporation was formed last year through the merger of in the wholesale market. The combination of significant Branch and Waihopai 13.5 66.0 International New Zealand Limited ("Alliant"), formerly three neighbouring US energy companies - IES Utilities generation capability and the wholesale trading operation Total South Island 202.0 857.0 known as IES. serving Iowa, Interstate Power Company serving northern is the key to TrustPower being able to profitably deliver Iowa, southern Minnesota and Illinois, and Wisconsin North Island low cost energy in an increasingly competitive environment. Power & Light Company, serving Wisconsin and parts Matahina 72.0 295.0 Beyond the production and wholesale trading operations, 1 of Illinois. Patea and others 40.8 170.0 2 TrustPower now has over 210,000 domestic and wholesale Alliant Energy Corporation generates and markets electric Tararua Wind Farm 31.7 137.0 3 customers spread throughout New Zealand, having 4 Kaimai energy from 18 generating facilities with a total output of 5 Total North Island 144.5 602.0 3 8 acquired over 115,000 retail customers (see map below) 6 Wheao nearly 5,000 MW, enough to light 1.5 million homes. It has 11 Matahina TrustPower's existing generation 75.0 310.0 12 during the last 12 months. In addition, the retailing business 7 9 10 more than 850,000 electricity customers and 360,000 13 14 Wheao TrustPower's total generation 421.5 1,769.0 18 Hinemaiaia has the TrustPower brand, call centre and back office Patea etc 17 15 natural gas customers and approximately 6,000 employees. 19 16 Windfarm support systems. TrustPower is well positioned in the 21 20 Assets to year-end 1997 exceeded $US5 billion. 25 22 TrustPower's hydro generation (currently representing over 28 23 24 market, it has a head start in retaining and winning 27 An integral part of Alliant Energy Corporation's success 90% of TrustPower's estimated total annual output), West Coast 26 customers from its experience and culture of competitive Marlborough 30 is its joint venture, Cargill-Alliant Energy. This is an consists of 10 different schemes all located in different 29 Coleridge 31 customer service. 32 Highbank etc organisation that combines the world class commodity watersheds in both islands (see the map below). The 33 and risk management expertise of Cargill with Alliant's TrustPower's generation capacity has increased benefit of this spread is a comparatively low hydrology 35 34 Paerau 38 energy trading expertise. Alliant-Cargill buys, sells and by a factor of four! risk and an opportunity for TrustPower to take advantage 36 37 Waipori trades electricity across the entire United States. Over the last 12 months TrustPower has, through of regional price differentials. In addition, TrustPower now Alliant brings specific skills to the retailing and generation acquisitions, increased its generation capacity from 75MW has sufficient reservoir storage that will allow it to obtain side of the electricity business with extensive experience to 422MW. TrustPower's annual output is now estimated peak period prices. in providing economically priced energy to low population at 1,770GWh per annum which makes it the third largest density areas similar to New Zealand. publicly listed generator. Following these transactions, TrustPower is owned as Alliant and Infratil's relationship has developed for some follows: months, finally leading to a formal arrangement to invest Fully Diluted together in the New Zealand electricity sector. The key NORTH ISLAND Shareholding 1 terms of this arrangement are for: 1 Top Energy 13 King Country Energy Infratil 25.8% 2 2 Northpower 14 Wairoa Power 1. Infratil and Alliant to jointly pursue investments in the 3 Power New Zealand 15 Hawke's Bay Power 3 Alliant International New Zealand 8.6% 4 Mercury Energy 16 CHB Power 4 electricity sector with Infratil having an option to hold 5 Counties Power 17 Powerco 5 3 8 Tauranga Energy Consumer Trust 22.7% 6 WEL Energy 18 Egmont Electricity 6 11 60% of any joint investment; 7 TrustPower 19 CentralPower Tauranga District Council 7.6% 12 9 8 Tauranga Electricity 20 ScanPower 7 10 9 Bay of Plenty Electricity 21 Electro Power 13 14 2. The joint investment in TrustPower is to be maintained; 18 The Australian Gas Light Company 7.2% 10 Eastland Energy 22 Electra 17 15 11 Waipa Power 23 TransAlta 3. Infratil and Alliant have pre-emptive rights and/or rights 19 16 Rotorua Energy Charitable Trust 4.2% 12 Waitomo Energy Services 24 Wairarapa Electricity 21 20 25 22 of first refusal over joint investments and investment 28 Other minority shareholders 23.9% 23 24 27 26 Total 100.0% opportunities. 30 For more information, visit Alliant's Internet Site, which 29 31 32 SOUTH ISLAND can be accessed via Infratil's Internet Site. 33 Infratil and Alliant together own 34.4% of TrustPower. 25 Citipower 32 Electricity Ashburton 35 34 26 Marlborough Electric 33 Alpine Energy Whilst this transaction meant the end to a long relationship 38 27 Tasman Energy 34 Waitaki Power 36 37 28 Buller Electricity 35 Central Electric with the RECT, it signals a new and rewarding period in 29 Westpower 36 Otago Power 30 MainPower 37 Dunedin Electricity which Infratil and Alliant will work together supporting 31 Southpower 38 PowerNet TrustPower growing and maximising shareholder value. MARCH 1999 www.infratil.co.nz

Ownership changes at HRL Morrison & Co

Current Portfolio

At the date of this newsletter (9 March 1999), the market value of Infratil’s portfolio (adjusted for tax On 4 March 1999, it was announced that Lend Lease on unrealised gains on holdings in Infratil Securities Corporation ("Lend Lease") purchased 25% of Morrison Limited) was approximately $342 million less

& Co, parent of Infratil's manager, Morrison & Co liabilities of $44 million. This is the tenth "Infratil Update" prepared by the Company to inform shareholders about recent developments

Infrastructure Management Limited. Lend Lease also has Infratil’s net tangible asset backing was 157.4 involving Infratil and the infrastructure industry in New Zealand. This issue outlines recent developments at options to increase its shareholding in future years. cents per share based on market prices at that TrustPower and introduces Alliant International New Zealand Limited and Lend Lease Corporation. Lend Lease is regarded as one of Australia's leading date and after allowing for tax on unrealised gains companies. It has core operations providing development, in Infratil Securities Limited. project management, design and construction services in Infratil’s Investment Portfolio Australasia, South East Asia and Europe for infrastructure (at market prices as at 9 March 1999) and property projects. Lend Lease has managed the development of a number of infrastructure projects on TrustPower $152.2m behalf of clients and on its own account. In recent years, project management contracts have included Australian Port of Tauranga $87.6m airport terminals as well as gas and hydro electric generation Wellington International Airport $45.2m projects. In addition, Lend Lease owns 50% of Australian CentralPower $41.9m Water Services ("AWS"), a joint venture with Suez Lyonnaise des Eaux. AWS manages Prospect Water, the largest water Powerco $15.5m an update on trustpower plant in the Southern Hemisphere and is a consortium Other $3.0m Over the last 9 months, following the sale of its network The Act requires the operational separation of lines and member of the $300M Mangere Wastewater redevelopment business, TrustPower has expanded its generation and supply business activities by 1 July 1999 and ownership project in South Auckland. retail assets through a series of acquisitions and is now separation by 1 January 2004. Lend Lease's other core operations are funds and asset a significant company in these sectors of the New Zealand TrustPower elected to sell its lines business along with its management. In Australia, it owns MLC and Australian The following graph shows the relative electricity industry. contracting business, PowerLink Limited. Following a Eagle, which manage approximately A$30 billion of assets. industry weightings of the Infratil portfolio competitive sales process, TrustPower sold its lines Lend Lease also formed and manages a A$4 billion as at 9 March 1999. Why did TrustPower sell its lines business? business to United Networks Limited (formerly Power Australian property company, General Property Trust. Lend In early 1998, the Minister of Energy expressed concern New Zealand) for $485 million. Infratil supported this Lease is now the largest property funds manager in the Industry Weighting that the structure of the electricity industry was not Based on market prices as at 9 March 1999 decision and considers that TrustPower obtained a very United States, with over US$25 billion in property assets. conducive to competition. As a result, consumers were satisfactory price. In Europe Lend Lease has lead some major property not perceived to be benefiting from falling wholesale TrustPower remained in the supply business because it developments. It recently completed the Bluewater retail Electricity electricity prices and the efficiencies from earlier reforms. Distribution believes that it can maximise returns to shareholders centre in the UK, the largest shopping centre in Europe. 16.7% In response the Government passed the Electricity Industry through its diverse, low cost generation assets and its In New Zealand it owns 50% of the company that manages Reform Act 1998 (the "Act"). expertise in the wholesale electricity market and retail the Kiwi Property Group of companies. The Act modified the electricity industry in three major Electricity energy marketing. In addition, the supply business is a Lend Lease adds specific industry skills in water and Generation 44.1% respects: Ports sector where new opportunities were likely to emerge over wastewater, rail and greenfields (start-up and construction) 1. Mandatory operational and ownership separation of 26.1% the next three to five years with the split and, ultimately opportunities that complement Morrison & Co's core the lines and supply businesses1, primarily to ensure privatisation of ECNZ. strengths in electricity, ports and airports. Lend Lease's open access to distribution networks for all retailers; retail and property skills also add depth to Morrison & Airports 2. Re-emphasis on the regulatory right to impose price 13.1% Co's airport team. 1 An electricity supply business is defined as a business that restraint on line charges; and sells electricity in New Zealand; sells financial hedges for risks For more information visit the Lend Lease Internet Site, 3. Promotion of choice for customers from competing relating to the price of electricity in New Zealand; generates electricity in New Zealand; or trades in rights to sell or generate which can be accessed via Infratil's Internet Site. electricity retailers. electricity in New Zealand.

Whilst all reasonable care has been taken to ensure the facts stated are accurate, neither Infrastructure & Utilities NZ Limited, Infrastructure & Utilities NZ Limited Morrison & Co Infrastructure Management Limited, nor any of their directors, officers or employees guarantee the accuracy or completeness of the information stated herein.