Ann: GENERAL: TPW: Snowtown Stage 2 Project, Fina

• Release Date: 26/07/12 11:21
• Summary: GENERAL: TPW: Snowtown Stage 2 Project, Financial Close
• Price Sensitive: No
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TPW
26/07/2012 09:21
GENERAL

REL: 0921 HRS TrustPower Limited

GENERAL: TPW: Snowtown Stage 2 Project, Financial Close

Media Announcement

26 July 2012

TrustPower Limited (TrustPower) is pleased to advise that financial close is
expected to be achieved by 31 July 2012 for the development of Snowtown Stage
2 project, being a 270 MW extension of TrustPower's existing Snowtown Stage 1
Wind Farm in South Australia.  As previously advised the Snowtown Stage 2
project will consist of two separately metered wind farms, Snowtown 2 North
(144MW) and Snowtown 2 South (126 MW), sharing a single transmission line
owned by TrustPower.

All key conditional agreements and approvals required for the development of
the Snowtown Stage 2 project have been entered into or secured.  Foreign
exchange hedging arrangements to cover Euro and USD currency exposure on the
turbine supply contract have been completed at favourable rates and so the
expected total project cost (excluding capitalised interest) has reduced from
A$465 million to A$439 million or $A 1.6 million / MW.

On this basis Snowtown Stage 2 project represents a very attractive
investment for TrustPower and its shareholders.

TrustPower will fund the project via Australian dollar bank facilities
provided by its relationship banks which will mature in late 2014.  It is
expected that a proportion of these facilities will be refinanced over the
next 12 months with long term Australian dollar funding arrangements.

TrustPower has entered into an exclusive sales process for Snowtown 2 South
with a potential co-investor that was earlier shortlisted by TrustPower.

If the co-investor sale process is not completed then, as previously advised,
TrustPower intends to hold the entire Snowtown Stage 2 project through to
commissioning at which time a wider sales process will be conducted for
Snowtown 2 South.

The long term annual expected output and capacity factors for the Snowtown
Stage 2 project are shown in the table below:

 MW GWh Capacity Factor
Snowtown 2 North 144 504 40.0%
Snowtown 2 South 126 481 43.6%
Total Snowtown Stage 2 270 985 41.7%

TrustPower believes that the Snowtown site is one of the best wind farm sites
in mainland Australia.

The construction of Snowtown 2 North is expected to reduce the long term
annual expected output of the existing 100MW Snowtown Stage 1 wind farm by
around 19 GWh (4.9%) due to wind shading caused by the new turbines to be
built on the Snowtown 2 North site.  Consequently, Snowtown Stage 1 wind
farm's forecast long term capacity will reduce to around 41.9% from 44.1%.

The Snowtown Stage 2 project's economic performance will be underpinned by
long term power purchase agreements entered into with Origin Energy
Electricity Limited for 100% of the total output of the Snowtown Stage 2 wind
farms. A long term operations and maintenance agreement had been entered into
with Siemens Ltd.

TrustPower believes that the economics for the Snowtown Stage 2 project are
attractive due to a combination of favourable turbine pricing, a strong
Australian dollar and a well priced long term power purchase agreement that
could run for a maximum of 21 years if a 5 year option to extend is
exercised.

TrustPower expects the following financial impact on TrustPower Group of the
first full year of operation from the Snowtown Stage 2 project, expected to
be FY 2016.

 Snowtown 2 North* Snowtown 2 South Total
Snowtown Stage 2
CAPEX (A$m) 257 182 439
EBITDAF (A$m) 41.2 36.7 77.9
NPAT (A$m) 8.6 11.3 19.9
Free cash flow from operations (after tax and debt servicing) (A$m) 21.5 20.4
41.9
Earnings per share (NZ cents per share) 3.4 4.5 7.9
* Includes the wind shading effect on expected Snowtown Stage 1 wind farm
output post commissioning of Snowtown 2 North.
Note: The information included in this table relates to future matters and
should be read subject to the Important Notice and Significant Assumptions
set out at the end of this announcement.

The projected returns to shareholders of TrustPower are expected to be well
in excess of the cost of capital employed in the project.

The construction period for the Snowtown Stage 2 project will commence
shortly after financial close. Erection of the first batch of turbines on
site is expected to commence in September 2013 with full commissioning of
Snowtown 2 South targeted to be completed by May 2014 and Snowtown 2 North by
November 2014.

The additional debt required to fund the Snowtown Stage 2 project will
significantly increase the TrustPower Group's gearing (debt to debt plus
equity) ratio. However, TrustPower anticipates that the gearing ratio will
be comfortably within the upper limit of the Group's target gearing ratio
range of 25-50% and that the TrustPower Group will comfortably operate within
its banking covenants during construction of Snowtown Stage 2 project. Post
commissioning of the project, the strong expected cash flows from the project
are expected to reduce gearing levels quite quickly.  A sale of Snowtown 2
South would also significantly reduce the gearing ratio.

Financial close of the Snowtown Stage 2 project is an important milestone for
TrustPower in terms of its wind development aspirations in Australia.
TrustPower holds development options over a further 1,280 MW of wind
generation opportunities in New South Wales, Victoria and South Australia and
is looking to advance development planning submissions for some of these
opportunities over the next 12 months.

Vince Hawksworth
Chief Executive

07 574 4866
End CA:00225319 For:TPW    Type:GENERAL    Time:2012-07-26 09:21:13