Imputed amount per security Non-taxable Bonus Share Issue $0.11 $ * amount per security

Transcription

1 Appendix 1 (Listing Rule 10.4) Half Year Announcement Contact Energy Ltd Contact Energy Limited Results for announcement to the market Basis of Report Reporting Period 6 months to 31 December 2010 Previous Reporting Period 6 months to 31 December 2009 Amount (s) Percentage change Operating Revenue and Other Income 1,198, % Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation, Change in Fair Value of Financial Instruments and Other Significant Items (EBITDAF) 225, % Profit for the Period After Tax 83, % Underlying Earnings After Tax 1 78, % Basic and Diluted Earnings Per Share (Cents) % Underlying Earning Per Share (Cents) % Distribution Equivalent amount per security Imputed amount per security Non-taxable Bonus Share Issue $0.11 $ * *Applicable to shareholders who accept the associated buy back offer Record Date 11 March 2011 Date Strike Price Available 21 March 2011 Profit Distribution Plan Election Date 28 March 2011 Non-taxable Bonus Share Allotment Date and Dividend Payment Date 31 March 2011 Comments: 1. Underlying Earnings After Tax and Underlying Earnings Per Share exclude one off items and the change in fair value of financial instruments (net of tax). Attachments: Investor Presentation Financial Statements for the half-year ended 31 December 2010 KPMG Auditors Review Report 1

2 Condensed Interim Financial Statements for the six months ended 31 December 2010 Income Statement Statement of Comprehensive Income Statement of Changes in Equity Statement of Financial Position Statement of Cash Flows Notes to the condensed interim group financial statements 1 Statement of accounting policies 2 Segment reporting 3 Revenue 4 Operating expenses 5 Net interest expense 6 Income tax expense 7 Distributions 8 Earnings and net tangible assets per share 9 Share capital 10 Share-based payments 11 Investments in associates and jointly controlled entities 12 Borrowings 13 Derivative financial instruments 14 Commitments 15 Material related party transactions 16 Whirinaki generation plant 17 Subsequent events Auditors review report

3 1 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Income Statement for the six months ended 31 December 2010 Note 31 Dec 2009* 12 months ended Revenue 3 1,188,172 1,059,419 2,143,017 Other income 10,458 10,831 21,391 Operating expenses 4 (973,145) (845,225) (1,737,426) Earnings before net interest expense, income tax, depreciation, amortisation, change in fair value of financial instruments and other significant items (EBITDAF) 225, , ,982 Depreciation and amortisation (85,485) (86,691) (161,903) Change in fair value of financial instruments 13 1,813 11,454 4,531 Other significant items (8,894) Equity accounted earnings of associates 11 1,815 1,469 3,272 Net interest expense 5 (30,087) (28,991) (55,980) Profit before income tax 113, , ,008 Income tax expense 6 (29,845) (35,208) (53,340) Profit for the period 83,696 87, ,668 Basic and diluted earnings per share (cents) * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. Non-statutory measure: underlying earnings Underlying earnings after tax is presented to allow stakeholders to make an assessment and comparison of underlying earnings after adjusting for significant one-off items and the non-cash change in fair value of financial instruments. Note 31 Dec 2009* 12 months ended Profit for the period 83,696 87, ,668 Underlying adjustments Change in fair value of financial instruments 13 (1,813) (11,454) (4,531) Other significant items: Retail transaction processing outsourcing costs 3,330 Removal of New Plymouth asbestos and related costs 5,564 Adjustments before income tax (1,813) (11,454) 4,363 Income tax expense 544 3,436 (1,309) Impact of change in corporate income tax rate (3,612) (42,650) Removal of tax depreciation on buildings 34,765 Adjustments after income tax (4,881) (8,018) (4,831) Underlying earnings after tax 78,815 79, ,837 Underlying earnings per share (cents) * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. The accompanying notes form an integral part of these condensed interim group financial statements.

4 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Statement of Comprehensive Income for the six months ended 31 December 2010 Note 31 Dec 2009* 12 months ended Profit for the period 83,696 87, ,668 Other comprehensive income: Change in foreign currency translation reserve 270 (85) (221) Change in cash flow hedge reserve 19,720 13,203 8,298 Total other comprehensive income before tax 19,990 13,118 8,077 Deferred tax relating to components of other comprehensive income (5,617) (4,581) (2,209) Re-measurement of deferred tax on change in corporate income tax rate (758) 555 Other comprehensive income for the period after tax 13,615 8,537 6,423 Total comprehensive income for the period 97,311 95, ,091 * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. The accompanying notes form an integral part of these condensed interim group financial statements.

5 3 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Statement of Changes in Equity for the six months ended 31 December 2010 * Note Share capital Foreign currency translation reserve Cash flow hedge reserve Share-based payment reserve Retained earnings Total shareholders equity Opening balance as at 1 July , (38,660) 1,752 1,867,587 2,659,602 Total comprehensive income for the period (65) 8,602 87,058 95,595 Transactions with owners recorded directly in equity: Change in share capital 9 71,120 71,120 Change in share-based payment reserve Restricted shares vested during the period 10 (10) Distributions declared 7 (99,503) (99,503) Total transactions with owners recorded directly in equity 71, (99,503) (27,814) closing balance as at 31 December , (30,058) 2,311 1,855,142 2,727,383 Opening balance as at 1 January , (30,058) 2,311 1,855,142 2,727,383 Total comprehensive income for the period (117) (1,997) 67,610 65,496 Restricted shares and options lapsed during the period (36) 36 Transactions with owners recorded directly in equity: Change in share capital 9 49,254 49,254 Change in share-based payment reserve Distributions declared 7 (65,934) (65,934) Total transactions with owners recorded directly in equity 49, (65,934) (16,101) closing balance as at 948, (32,055) 2,854 1,856,854 2,776,778 Opening balance as at 1 July , (32,055) 2,854 1,856,854 2,776,778 Total comprehensive income for the period ,427 83,696 97,311 Transactions with owners recorded directly in equity: Change in share capital 9 69,289 69,289 Change in share-based payment reserve Distributions declared 7 (84,915) (84,915) Total transactions with owners recorded directly in equity 69, (84,915) (14,658) closing balance as at 31 December ,018, (18,628) 3,822 1,855,635 2,859,431 * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. The accompanying notes form an integral part of these condensed interim group financial statements.

6 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Statement of Financial Position as at 31 December 2010 Note 31 Dec 2009* Shareholders equity 2,859,431 2,727,383 2,776,778 Represented by: Current assets Cash and short-term deposits 5,754 76, Receivables and prepayments 266, , ,148 Inventories 88,259 37,683 58,366 Carbon emission units 7,541 Derivative financial instruments 13 2,677 3,002 4,955 Total current assets 370, , ,390 Non-current assets Property, plant and equipment 4,606,639 4,351,355 4,511,314 Intangible assets 307, , ,201 Gas storage cushion gas 50,906 47,304 49,022 Investment in associates 11 10,552 8,436 8,809 Available-for-sale financial assets 2,935 2,935 2,935 Derivative financial instruments 13 2, Other non-current assets 7,786 6,949 7,305 Total non-current assets 4,989,174 4,683,027 4,864,373 Total assets 5,359,987 4,999,779 5,147,763 Current liabilities Borrowings 12 33,656 7,632 3,180 Current portion of term borrowings ,456 Derivative financial instruments 13 32,892 71,248 31,895 Payables and accruals 311, , ,430 Tax payable 14,942 6,430 6,046 Provisions 14,485 6,103 13,146 Total current liabilities 407, , ,697 Non-current liabilities Borrowings 12 1,265,578 1,032,232 1,279,233 Derivative financial instruments , ,019 98,811 Provisions 46,744 35,251 43,429 Deferred tax 645, , ,090 Other non-current liabilities Total non-current liabilities 2,092,688 1,820,435 2,054,288 Total liabilities 2,500,556 2,272,396 2,370,985 Net assets 2,859,431 2,727,383 2,776,778 * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. The Directors of Contact Energy Limited authorised these condensed interim group financial statements for issue. On behalf of the Board. Grant King Phillip Pryke Chairman, 21 February 2011 Deputy Chairman, 21 February 2011 The accompanying notes form an integral part of these condensed interim group financial statements.

7 5 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Statement of Cash Flows for the six months ended 31 December 2010 Note 31 Dec months ended Cash flows from operating activities Cash provided from: Receipts from customers 1,151,063 1,119,268 2,185,718 Dividends received 857 1,664 3,862 1,151,920 1,120,932 2,189,580 Cash applied to: Payments to suppliers and employees (964,963) (905,163) (1,779,301) Retail transaction processing outsourcing costs (514) (427) Supplementary dividend paid to shareholders 7 (610) (836) (1,293) Tax paid (14,232) (25,160) (40,200) (980,319) (931,159) (1,821,221) Net cash inflow from operating activities 171, , ,359 Cash flows from investing activities Cash provided from: Interest received 450 2,881 4, ,881 4,848 Cash applied to: Purchase of property, plant and equipment (150,960) (198,550) (411,279) Purchase of intangible assets (24,324) (15,239) (29,557) Removal of New Plymouth asbestos and related costs (113) (2,046) (2,922) Purchase of investment in Energyhedge 11 (8) (8) Purchase of cushion gas (1,223) (1,490) Repayment of loan to associate (1,085) (1,886) (175,397) (218,151) (447,142) Net cash (outflow) to investing activities (174,947) (215,270) (442,294) Cash flows from financing activities Cash provided from: Proceeds from borrowings 160, ,000 Proceeds from other short-term facilities 41,329 8, , ,967 8, ,258 Cash applied to: Interest paid (49,942) (52,216) (103,324) Distributions paid to shareholders (15,626) (28,235) (44,904) Financing costs (45) (102) (923) Profit distribution-related costs (265) (311) Repayment of borrowings (116,838) (160,228) Repayment of other short-term facilities and finance lease liabilities (9,298) (4,568) (145,296) (191,749) (85,386) (454,986) Net cash inflow/(outflow) from/to financing activities 10,218 (77,202) (104,728) Net increase/(decrease) in cash and cash equivalents 6,872 (102,699) (178,663) Add: cash and cash equivalents at the start of the period (1,118) 177, ,545 Cash and cash equivalents at the end of the period 5,754 74,846 (1,118) Cash and cash equivalents comprise: Bank overdraft 12 (1,987) (2,039) Cash and short-term deposits 5,754 76, ,754 74,846 (1,118) The accompanying notes form an integral part of these condensed interim group financial statements.

8 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Statement of Cash Flows for the six months ended 31 December 2010 (continued) Reconciliation of profit for the period to cash flows from operating activities Note 31 Dec 2009* 12 months ended Profit for the period 83,696 87, ,668 Items classified as investing/financing: Net interest expense 5 30,087 28,991 55,980 30,087 28,991 55,980 Non-cash items: Write-off of receivables 5,041 7,571 15,046 Movement in provisions ,023 Share-based payments 1, ,596 Depreciation and amortisation 85,485 86, ,903 Equity accounted (earnings)/loss of associates net of dividends received (1,129) 195 (261) Change in fair value of financial instruments 13 (1,813) (11,454) (4,531) Increase in deferred tax 7,099 6,200 9,050 Other non-cash items 259 (623) (1,225) 96,505 89, ,601 Movement in working capital: (Increase)/decrease in receivables and prepayments (53,757) 46,566 19,936 (Increase) in inventories (28,677) (21,777) (42,460) Increase/(decrease) in payables and accruals 43,142 (43,649) (11,876) Increase in tax payable 8,896 4,212 3,828 (Increase) in other assets (8,291) (1,200) (1,318) (38,687) (15,848) (31,890) Net cash inflow from operating activities 171, , ,359 * Comparative numbers have been restated due to a voluntary change in accounting policy at. Refer to note 1. The accompanying notes form an integral part of these condensed interim group financial statements.

9 7 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December 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 Exchange (NZSX). It also has bonds listed on the New Zealand Debt Exchange (NZDX). The Parent is an issuer in terms of the Financial Reporting Act The condensed interim group financial statements of Contact Energy Limited (the financial statements) as at, and for the six months ended, 31 December 2010 comprise the Parent and its subsidiaries, interests in associates and jointly controlled entities (together referred to as Contact or the ). Contact is a diversified and integrated energy group focusing on the generation and retailing of electricity. Other activities include the sale of natural gas and liquefied petroleum gas (LPG) to retail and wholesale customers throughout New Zealand. Basis of preparation The functional and reporting currency used in the preparation of the financial statements is New Zealand dollars, rounded to the nearest thousand (). The financial statements have been prepared in accordance with New Zealand equivalents to International Accounting Standard IAS 34: Interim Financial Reporting (NZ IAS 34) and include condensed notes to the financial statements. The financial statements also comply with International Accounting Standard IAS 34: Interim Financial Reporting. These 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 (2010 Annual Report). Changes in accounting policies There have been no changes in accounting policies since. The accounting policies set out in the 2010 Annual Report have been applied consistently to all periods presented in these financial statements. In the year ended Contact changed its accounting policy in relation to accounting for generation plant and equipment (full details are provided in the 2010 Annual Report). The change in accounting policy had the following impacts on the six months ended 31 December 2009: 31 Dec 2009 Increase in depreciation and amortisation 1,665 Decrease in income tax expense* 590 Decrease in profit for the period 1,075 Decrease in property, plant and equipment 406,498 Decrease in deferred tax 123,133 Decrease in asset revaluation reserve 1,895,700 Increase in retained earnings 1,612,335 * The decrease in income tax expense is due to the tax benefit from the higher depreciation expense, and the deferred tax asset on restoration provisions previously recognised through the asset revaluation reserve now being recognised through the Income Statement.

10 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December Dec 2009 Decrease in basic and diluted earnings per share (cents) 0.18 Decrease in underlying earnings per share (cents) 0.18 Decrease in net tangible assets per share (dollars) 0.48 As a result of the change in accounting policy the comparatives in the Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Financial Position and the related notes have been restated. Emissions Trading Scheme As a result of the introduction of the Emissions Trading Scheme, Contact has applied the following accounting policy from 1 July Carbon emission units purchased for compliance purposes are recognised at initial cost (purchase price) less any accumulated impairment losses. For the purpose of impairment testing, carbon emission units are allocated to the individual cash-generating units to which they relate. Carbon emission units are surrendered on a first-in first-out basis according to the liquidity of the units. Although carbon emission units can be banked, they will generally be surrendered within one year and are therefore recognised as current intangible assets and not amortised. Any purchased forward contracts of carbon emission units for compliance purposes are measured at cost on the dates Contact acquires the units. For all forward contracts, Contact will determine whether the contracts meet the definition of a financial instrument during the period between when the forward contracts are entered into and when the units are received. Where forward contracts for carbon emission units are entered into and continue to be held in accordance with Contact s own usage expectation, Contact will make use of the own use exemption. This allows forward contracts on those units not to be accounted for as financial instruments. Where the own use exemption does not apply, forward contracts for the purchase of carbon emission units are measured at fair value from the date of inception until the receipt of the units. Gains and losses arising from changes in the fair value are recognised in the Income Statement. Contact recognises a liability in respect of its obligation to deliver carbon emission units as the obligation arises. The liability is measured at the cost of the purchased units less accumulated impairment losses on a first-in first-out basis to the level of units or forward contracts held, with the balance recognised at fair value at the end of the reporting period. Any movements in the liability are recognised within operating expenses in the Income Statement. Presentational changes Certain presentational changes have been made to the comparative Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position, Statement of Cash Flows and the related notes to ensure consistency with the current period treatment. The only material changes that have been applied retrospectively to 31 December 2009 relate to: reclassification of meter costs from other operating expenses, reclassification of excess cushion gas from gas storage cushion gas to inventories.

11 9 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December 2010 Adoption status of relevant new financial reporting standards and interpretations The following relevant new amendments to standards issued in May 2009 are mandatory for the financial year beginning 1 July 2010 and have been adopted by Contact in the preparation of these financial statements. The adoption of these amendments has had no impact on the financial statements: NZ IAS 7 Amendment: Statement of Cash Flows. NZ IAS 17 Amendment: Leases. NZ IAS 36 Amendment: Impairment of Assets. Contact has elected not to early adopt the following standards, which have been issued but are not yet effective and are considered relevant to the financial statements: NZ IFRS 9 Financial Instruments approved November 2009 and effective for annual reporting periods beginning on or after 1 January NZ IAS 24 Related Party Disclosures (revised 2009) amendment approved November 2009 and effective for annual reporting periods beginning on or after 1 January NZ IAS 34 Interim Financial Reporting amendment approved May 2010 and effective for annual reporting periods beginning on or after 1 January Contact does not currently intend to early adopt any of these standards or amendments before their effective dates. The Directors anticipate that the above standards and amendments will have no material impact on the financial statements in the period of initial application. Accounting estimates and judgements The preparation of the 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. Contact s significant areas of estimation and critical judgements in these financial statements are the same as those contained in the 2010 Annual Report. 2 Segment reporting Identification of reportable segments Contact has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director in assessing performance and in determining the allocation of resources. The Managing Director is Contact s chief operating decision-maker within the meaning of NZ IFRS 8. Contact has identified two operating segments: Electricity and Other. Products and services from which reportable segments derive their revenues Electricity The Electricity business is a generator and retailer of electricity throughout New Zealand. Electricity is generated by means of hydro, geothermal and thermal sources/power stations. Electricity generated is required to be sold to the national grid and then purchased from the relevant node to be retailed to commercial and residential customers. Other The Other business is a combination of other services offered by Contact. These include the sale of gas to retail and wholesale customers and the sale of LPG to commercial and residential customers in New Zealand. Individual services within the Other segment do not exceed 10 per cent of revenue, profits or total assets and are therefore not separately disclosed.

12 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December 2010 Accounting policies and inter-segment transactions The accounting policies used by Contact in reporting segments internally are the same as those contained in the 2010 Annual Report: Inter-segment revenue The inter-segment revenue is a charge for electricity meters between the Electricity and Other segments. The inter-segment charge aims to have the Electricity segment break even on retail customer meter activity. The following items and associated assets are not allocated to operating segments as they are not reported to the chief operating decision-maker at a segment level: Change in fair value of financial instruments. Other significant items. Equity accounted earnings of associates. Net interest expense. Income tax expense. unaudited 31 December 2010 Electricity Other Inter-segment Total segment revenue and other income 1,040, ,182 (14,733) 1,198,630 Total segment direct costs (737,815) (129,578) 14,733 (852,660) Segment operating margin 302,366 43, ,970 Segment other operating expenses (98,797) (21,688) (120,485) Segment EBITDAF* 203,569 21, ,485 Depreciation and amortisation (80,802) (4,683) (85,485) Segment result 122,767 17, ,000 Change in fair value of financial instruments 1,813 Equity accounted earnings of associates 1,815 Net interest expense (30,087) Income tax expense (29,845) Profit for the period 83,696 Total unaudited 31 December 2009 Electricity Other Inter-segment Total segment revenue and other income 901, ,537 (14,375) 1,070,250 Total segment direct costs (610,432) (134,462) 14,375 (730,519) Segment operating margin 290,656 49, ,731 Segment other operating expenses (91,842) (22,864) (114,706) Segment EBITDAF* 198,814 26, ,025 Depreciation and amortisation (82,533) (4,158) (86,691) Segment result 116,281 22, ,334 Change in fair value of financial instruments 11,454 Equity accounted earnings of associates 1,469 Net interest expense (28,991) Income tax expense (35,208) Profit for the period 87,058 Total

13 11 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December 2010 audited 12 months ended Electricity Other Inter-segment Total segment revenue and other income 1,859, ,167 (28,982) 2,164,408 Total segment direct costs (1,284,101) (253,540) 28,982 (1,508,659) Segment operating margin 575,122 80, ,749 Segment other operating expenses (187,777) (40,990) (228,767) Segment EBITDAF* 387,345 39, ,982 Depreciation and amortisation (153,274) (8,629) (161,903) Segment result 234,071 31, ,079 Change in fair value of financial instruments 4,531 Other significant items (8,894) Equity accounted earnings of associates 3,272 Net interest expense (55,980) Income tax expense (53,340) Profit for the year 154,668 Total * In addition to the above information, the chief operating decision-maker considers the following components of EBITDAF within the Electricity segment: 31 Dec months ended Hedged generation 169, , ,394 Exposed generation 21,331 11,083 36,674 Retail electricity 13,157 27,293 49,277 Electricity segment EBITDAF 203, , ,345 3 Revenue 31 Dec months ended Wholesale electricity revenue 288, , ,359 Retail electricity revenue 740, ,008 1,301,924 Gas revenue 83,006 87, ,490 LPG revenue 64,985 71, ,304 Steam revenue 11,063 11,496 17,940 Total revenue 1,188,172 1,059,419 2,143,017

14 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December Operating expenses 31 Dec months ended Electricity purchases 253, , ,360 Electricity transmission, distribution and levies 280, , ,413 Gas purchases and transmission 243, , ,719 LPG purchases 45,004 50,178 99,175 Meter costs 10,743 10,427 20,992 Emission costs 19,509 Labour costs 48,368 43,618 83,490 Other operating expenses 72,117 71, ,277 Total operating expenses 973, ,225 1,737,426 5 Net interest expense 31 Dec months ended Interest expense 53,926 55, ,566 Interest expense capitalised (23,390) (24,017) (48,208) Interest income (449) (2,455) (4,378) Net interest expense 30,087 28,991 55,980 The weighted average capitalisation rate on funds borrowed for the six months ended 31 December 2010 is 7.8 per cent per annum (31 December 2009: 7.2 per cent; : 7.4 per cent). 6 Income tax expense The income tax expense for the six months ended 31 December 2010 reflects an effective income tax rate of 26.3 per cent (31 December 2009: 28.8 per cent; : 25.6 per cent). The effective income tax rate for the six months ended 31 December 2010 for the differs from the statutory rate of 30.0 per cent due to current period non-temporary differences, prior period adjustments and the corporate income tax rate change. The effective income tax rate is expected to be approximately 27.9 per cent for the 12 months ending 30 June 2011.

15 13 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December Distributions Distribution date Cents per share 31 Dec months ended 2009 year final distribution 22 September ,503 99, year interim distribution 30 March , year final distribution 27 September ,915 Supplementary dividend ,293 Foreign investor tax credit (610) (836) (1,293) Total distributions 84,915 99, ,437 All distributions were made pursuant to the Parent s Profit Distribution Plan (PDP). Under the PDP, all shareholders receive distributions in the form of non-taxable bonus shares with the option to have the shares, or a portion of them, bought back by the Parent for cash. Shareholders who elect to have their bonus shares bought back by the Parent at an equivalent cost under the off-market buy-back facility are treated as having received a fully imputed cash dividend. On 21 February 2011, the Board declared a distribution in the form of a non-taxable bonus issue under the PDP equivalent to 11.0 cents per share, for shares on issue at 11 March 2011, the record date, with bonus shares allocated and/or cash distributed if elected on 31 March Refer to note Earnings and net tangible assets per share 31 Dec 2009 Underlying earnings per share (cents)* Basic and diluted earnings per share (cents) Weighted average number of shares on issue over the period 611,266, ,648, ,288,553 Net tangible assets per share (dollars) Number of shares on issue at the end of the period 617,069, ,853, ,934,976 * Non-statutory measure. The calculation of underlying earnings per share is based on underlying earnings after tax after adjusting for significant one-off items and the non-cash change in fair value of financial instruments attributable to holders of unrestricted ordinary shares. It is calculated using the weighted average number of shares on issue over the period. The weighted average number of shares on issue over the period is reflective of the issue and repurchase of ordinary share capital pursuant to the Parent s PDP. For the purpose of calculating the weighted average number of shares on issue, the restricted shares previously issued under Contact s Employee Long-Term Incentive Scheme are excluded until shares become unrestricted.

16 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December 2010 The dilutive effect of share options and restricted shares has not been taken into account in the calculation of diluted earnings per share at 31 December 2010, 31 December 2009 and, as the relevant performance hurdles have not yet been met. The calculation of basic and diluted earnings per share is based on profit after tax. The calculation of net tangible assets per share at 31 December 2010, 31 December 2009 and is based on the total net assets less intangible assets (including carbon emission units), divided by the number of ordinary unrestricted shares on issue at the end of each period. 9 Share capital Ordinary shares unrestricted Number Opening balance as at 1 July ,314, ,613 Share capital issued 16,091,878 99,503 Share capital repurchased and cancelled during the period (4,554,184) (28,235) Restricted shares vested during the period 1, Transaction costs (148) closing balance as at 31 December ,853, ,743 Opening balance as at 1 January ,853, ,743 Share capital issued 10,815,501 65,934 Share capital repurchased and cancelled during the period (2,734,323) (16,669) Transaction costs (11) closing balance as at 604,934, ,997 Opening balance as at 1 July ,934, ,997 Share capital issued 14,871,511 84,915 Share capital repurchased and cancelled during the period (2,736,590) (15,626) closing balance as at 31 December ,069,897 1,018,286 The Parent issued 14,871,511 ordinary shares pursuant to the Parent s PDP on 28 September The PDP allowed shareholders to elect to have the Parent buy back the shares issued to them at the issue price. As a result of shareholder elections, the Parent completed an off-market buy-back of 2,736,590 shares. These shares were immediately cancelled upon buy-back. 10 Share-based payments Pursuant to Contact s Employee Long-Term Incentive Scheme, the Parent issued 4,614,132 share options during the period. Options issued pursuant to Contact s Employee Long-Term Incentive Scheme are recognised through the share-based payments reserve until the options are exercised. 11 Investments in associates and jointly controlled entities Contact holds a 25 per cent interest in Oakey Power Holdings Pty Limited, a 50 per cent interest in Rockgas Timaru Limited and a 20 per cent interest in Energyhedge Limited. Contact holds a 50 per cent interest in the Gasbridge Joint Venture. No associate or joint venture is material to Contact.

17 15 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December Borrowings This note provides information about the contractual terms of Contact s borrowings. Carrying value of borrowings Borrowing currency denomination 31 Dec 2009 Current borrowings Bank overdraft NZD 1,987 2,039 Other credit facilities NZD 25,000 4,071 Loan from associate AUD 489 Other short-term loans NZD 7,546 Finance lease liabilities NZD 1,110 1,085 1,141 Total current borrowings 33,656 7,632 3,180 Current portion of term borrowings Fixed rate senior notes USD 125,456 Total current portion of term borrowings 125,456 Non-current borrowings Non-current portion of term borrowings Fixed rate senior notes USD 471, , ,085 Retail fixed rate bonds NZD 542, , ,809 Wholesale fixed rate bonds NZD 99,770 99,795 Total non-current portion of term borrowings 1,114,459 1,030,821 1,171,689 Committed credit facilities NZD 150, ,200 Finance lease liabilities NZD 1,119 1,411 1,344 Total non-current borrowings 1,265,578 1,032,232 1,279,233 Foreign currency denominated term borrowings are hedged by cross currency interest rate swaps and are measured at fair value less deferred financing costs in the Statement of Financial Position. All other borrowings are held at amortised cost less deferred financing costs. The reconciliation of the New Zealand dollar equivalent of contracted term borrowings to the Statement of Financial Position carrying value is detailed below: unaudited 31 December 2010 Fixed rate senior notes Retail fixed rate bonds Wholesale fixed rate bonds Total term borrowings New Zealand dollar equivalent of notional borrowings 587, , ,000 1,237,299 Deferred financing costs (1,141) (7,251) (230) (8,622) Net fair value adjustment (114,218) (114,218) Carrying value of term borrowings 471, ,749 99,770 1,114,459 Current Non-current 471, ,749 99,770 1,114, , ,749 99,770 1,114,459

18 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December 2010 unaudited 31 December 2009 Fixed rate senior notes Retail fixed rate bonds Wholesale fixed rate bonds Total term borrowings New Zealand dollar equivalent of notional borrowings 747, ,000 1,297,527 Deferred financing costs (1,469) (9,010) (10,479) Net fair value adjustment (130,771) (130,771) Carrying value of term borrowings 615, ,990 1,156,277 Current 125, ,456 Non-current 489, ,990 1,030, , ,990 1,156,277 audited Fixed rate senior notes Retail fixed rate bonds Wholesale fixed rate bonds Total term borrowings New Zealand dollar equivalent of notional borrowings 587, , ,000 1,237,299 Deferred financing costs (1,275) (8,191) (205) (9,671) Net fair value adjustment (55,939) (55,939) Carrying value of term borrowings 530, ,809 99,795 1,171,689 Current Non-current 530, ,809 99,795 1,171, , ,809 99,795 1,171,689 Security Except for finance leases, Contact s borrowings are unsecured. Contact borrows under a negative pledge arrangement, which does not permit Contact to grant any security interest over its assets, unless it is an exception permitted within the negative pledge arrangements. All borrowing covenant requirements were met at 31 December 2010, 31 December 2009 and. Credit facilities Contact had total committed credit facilities at 31 December 2010 of $520.0 million, of which $175.0 million was drawn (31 December 2009: $685.0 million, $nil drawn; : $520.0 million, $106.2 million drawn). As at 31 December 2010, $75.0 million of the facilities mature in May 2011, $150.0 million mature in December 2012 and $295.0 million mature in March These committed credit facilities also support a $250.0 million commercial paper programme. This programme was unutilised at 31 December 2010 (31 December 2009 and : unutilised).

19 17 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December 2010 Gearing ratios The gearing ratios at 31 December 2010, 31 December 2009 and were as follows: 31 Dec 2009 Net debt Current borrowings (33,656) (7,632) (3,180) NZ dollar equivalent of term borrowings after foreign exchange and before deferred financing costs (587,299) (747,527) (587,299) Retail fixed rate bonds before deferred financing costs (550,000) (550,000) (550,000) Wholesale fixed rate bonds before deferred financing costs (100,000) (100,000) Committed credit facilities (150,000) (106,200) Other non-current borrowings (1,119) (1,411) (1,344) Cash and short-term deposits 5,754 76, Total net debt (1,416,320) (1,229,737) (1,347,102) Equity Shareholders equity (2,859,431) (2,727,383) (2,776,778) Remove net effect of fair value of financial instruments after tax (33,245) (40,036) (48,317) Adjusted equity (2,892,676) (2,767,419) (2,825,095) Total capital funding (4,308,996) (3,997,156) (4,172,197) Gearing ratio 32.9% 30.8% 32.3% 13 Derivative financial instruments Fair value of derivative financial instruments The fair value of the significant types of derivative financial instruments outstanding is summarised below: fair value assets fair value liabilities fair value assets 31 Dec 2009 fair value liabilities 31 Dec 2009 fair value assets fair value liabilities Cross currency interest rate swaps 578 (114,801) 720 (131,507) 724 (56,555) Interest rate derivatives (28,410) (26,183) (32,405) Cross currency interest rate swaps margin (5,227) (4,624) (3,325) Forward foreign exchange derivatives 319 (472) (4,360) 91 (1,511) Electricity price hedges 4,574 (18,271) 2,581 (24,593) 4,927 (36,910) Total derivative financial instruments 5,471 (167,181) 3,301 (191,267) 5,742 (130,706) Current 2,677 (32,892) 3,002 (71,248) 4,955 (31,895) Non-current 2,794 (134,289) 299 (120,019) 787 (98,811) 5,471 (167,181) 3,301 (191,267) 5,742 (130,706)

20 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December 2010 Change in fair value of financial instruments The change in the fair value of financial instruments recognised in the Income Statement and cash flow hedge reserve are summarised below: Favourable/(unfavourable) Hedge accounting designation Income Statement 6 months ended cash flow hedge reserve 6 months ended Income Statement 6 months ended 31 Dec 2009 cash flow hedge reserve 6 months ended 31 Dec 2009 Income Statement 12 months ended cash flow hedge reserve 12 months ended Cross currency interest rate swaps Fair value hedge (58,392) (75,967) (1,012) Borrowings 58,279 75,936 1,104 (113) (31) 92 Interest rate derivatives No hedge 3, , , Cross currency interest rate swaps margin Cash flow hedge 1,136 (3,038) 1,881 (4,168) 3,135 (4,123) Forward foreign exchange derivatives Cash flow hedge 1,267 (2,133) 807 Electricity price hedges Cash flow hedge (2,379) 21,361 (1,726) 19,124 (3,097) 10,967 Electricity price hedges No hedge (696) 1, Income tax on change in fair value of financial instruments taken to other comprehensive income (6,293) (4,601) (1,693) Total change in fair value of financial instruments 1,813 13,427 11,454 8,602 4,531 6, Commitments 31 Dec 2009 Capital and investment commitments 117, , ,844 Operating lease commitments 36,600 26,700 33,121 Other operating commitments 38,759 9,512 25,025 Future operating lease income 5,707 7,319 4,760 Gas commitments In addition to the above, Contact 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 2010 Annual Report. There have been no material changes to these commitments as at 31 December 2010.

21 19 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Notes to the condensed interim group financial statements for the six months ended 31 December Material related party transactions Material transactions wi th ultimate parent entity Mr Baldwin, Managing Director of Contact, is seconded to Contact from his employer Origin. Fees incurred or accrued during the six months ended 31 December 2010 in relation to Mr Baldwin s role as Managing Director totalled $0.7 million (six months ended 31 December 2009: $0.7 million; year ended : $1.2 million), which includes the cost of his salary and other employment benefits. At 31 December 2010 $0.1 million (31 December 2009: $0.1 million; : $0.5 million) of this amount remained outstanding. In addition, share-based payments under Contact s Employee Long-Term Incentive Scheme amounting to $0.3 million (six months ended 31 December 2009: $0.2 million; year ended : $0.5 million) were accrued for Mr Baldwin, being the fair value of the share-based payments relating to this reporting period. Refer to note 10. During the six months ended 31 December 2010, two members of staff were seconded from Contact to Origin and five members of staff were seconded from Origin to Contact. These services were charged at arm s length commercial rates. Transactions with Origin subsidiaries Contact and Origin Energy Resources NZ (TAWN) Limited have entered into an agreement in respect of the development and operation of the Ahuroa gas storage facility. Transactions for the six months ended 31 December 2010 amounted to $3.8 million (six months ended 31 December 2009: $3.6 million; year ended : $7.8 million). At 31 December 2010, $7.2 million (31 December 2009: $1.0 million; : $3.4 million) remained outstanding. Contact, Origin Energy Resources NZ (TAWN) Limited and Origin Energy Five Star Holdings Limited have entered into an agreement in respect of drilling and other costs associated with the development of assets for the Ahuroa gas storage facility. During the six months ended 31 December 2010, the transactions under this agreement totalled $2.3 million (six months ended 31 December 2009: $8.9 million; year ended : $24.6 million). At 31 December 2010, $0.1 million remained outstanding (31 December 2009: $5.4 million; 30 June 2010: $0.6 million). Contact and Origin Energy Resources NZ Limited have entered into an electricity supply contract to supply Origin s facilities in Taranaki. Transactions for the six months ended 31 December 2010 amounted to $0.3 million (six months ended 31 December 2009: $nil; year ended : $0.9 million). At 31 December 2010, $0.2 million remained outstanding (31 December 2009: $nil; : $0.5 million). Contact has entered into an agreement with Origin Energy Services Limited to provide infrastructure and data centre services for Contact s new SAP system. Transactions for the six months ended 31 December 2010 amounted to $1.3 million (six months ended 31 December 2009: $nil; year ended : $1.1 million). At 31 December 2010, $0.2 million remained outstanding (31 December 2009: $nil; : $nil). Rockgas Limited and Origin Energy LPG Limited have entered into an LPG Sale and Purchase Agreement for the purchase and shipping of imported LPG. During the six months ended 31 December 2010, transactions totalled $2.0 million (six months ended 31 December 2009: $18.9 million; year ended : $24.8 million). At 31 December 2010, no amounts remained outstanding (31 December 2009: $3.5 million; : $2.0 million). Rockgas Limited has entered into an LPG Gas Sale Agreement with Origin Energy Resources NZ (Rimu) Limited and Origin Energy Resources NZ (TAWN) Limited for the supply of LPG from the Rimu Production Station. Transactions for the six months ended 31 December 2010 totalled $0.3 million (six months ended 31 December 2009: $nil; year ended : $1.7 million). At 31 December 2010, no amounts remained outstanding (31 December 2009: $nil; : $0.1 million). Rockgas Limited has entered into an LPG Sales and Logistics Agreement with Origin Energy Resources (Kupe) Limited and Kupe Mining (No. 1) Limited for the supply of LPG from the Kupe Production Station. Transactions for the six months ended 31 December 2010 totalled $21.0 million (six months ended 31 December 2009: $nil; year ended : $19.1 million). At 31 December 2010, $3.9 million remained outstanding (31 December 2009: $nil; : $4.4 million).

22 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report Notes to the condensed interim group financial statements for the six months ended 31 December 2010 Rockgas Limited and Origin Energy Contracting Limited had an agreement in place during the period whereby Origin Energy Contracting Limited provided coastal LPG shipping services to Rockgas Limited. Transactions for the six months ended 31 December 2010 totalled $0.2 million (six months ended 31 December 2009: $nil; year ended : $3.3 million). At 31 December 2010, no amounts remained outstanding (31 December 2009: $nil; : $nil). Transactions with Directors Fees paid or accrued to Directors and Officers for director services for the six months ended 31 December 2010 totalled $0.5 million (six months ended 31 December 2009: $0.4 million; year ended : $1.0 million). At 31 December 2010, no amounts remained outstanding (31 December 2009: $0.2 million; : $0.1 million). 16 Whirinaki generation plant Contact is contracted to operate the Crown-owned reserve generation plant at Whirinaki in Hawke s Bay. Contact owns the Whirinaki site and has agreed to lease it to the Crown until June The Crown owns the plant and has engaged Contact to operate and maintain it until June Under the Project Development Agreement entered into in 2003, the Crown agreed to pay Contact compensation for loss of use of the site. Contact also receives an annual fee under the Operating and Maintenance Management Services Agreement. In December 2010 the Crown offered the Whirinaki generating plant for sale by open tender. The Crown has indicated a wish to conclude the sale by July 2011 and transfer ownership of the plant on either 1 December 2011 or 1 October Subsequent events On 21 February 2011, the Board declared a distribution pursuant to the PDP in the form of a non-taxable bonus issue for the period ended 31 December 2010 equivalent to 11.0 cents per share, for shares on issue at 11 March 2011, the record date, with bonus shares allocated and/or cash distributed, if elected, on 31 March Refer to note 7. On 21 February 2011, the Board approved the construction of the 166 megawatt Te Mihi geothermal project. The total cost of the project is approximately $623.0 million which will be funded through a combination of debt and equity. A pro-rata renounceable rights issue will be launched in the near term.

23 21 Contact Energy Limited and Subsidiaries Contact Energy Limited Half Year Report 2010 Auditors review report To the shareholders of Contact Energy Limited We have reviewed the attached interim financial statements in accordance with the Review Engagement Standards issued by the New Zealand Institute of Chartered Accountants. The financial statements provide information about the past financial performance of Contact Energy Limited and its subsidiaries ( the ) and its financial position as at 31 December Directors responsibilities The Directors of Contact Energy Limited are responsible for the preparation of interim financial statements which give a true and fair view of the financial position of the as at 31 December 2010 and the results of its operations and cash flows for the six months ended on that date. Reviewers responsibilities It is our responsibility to express an independent opinion on the interim financial statements presented by the Directors and report our opinion to you. Basis of opinion A review is limited primarily to enquiries of personnel and analytical review procedures applied to the financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Our firm has also provided other assurance services to the. Partners and employees of our firm may also deal with the on normal terms within the ordinary course of trading activities of the businesses of the. These matters have not impaired our independence as auditors of the. The firm has no other relationship with, or interest in, the. Review opinion Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements on pages 1 to 20 do not give a true and fair view of the financial position of the as at 31 December 2010 and the results of its operations and cash flows for the six months ended on that date in accordance with NZ IAS 34 Interim Financial Reporting. Our review was completed on 21 February 2011 and our opinion is expressed as at that date. Wellington

24 Management discussion of financial results for the six-month period ended 31 December 2010 Financial results to 31 December Months Ended 6 Months Ended Variance 31 December December 2009* $m $m $m % Revenue and Other Income 1, , % Operating Expenses (1) (973.1) (845.2) (127.9) (15%) EBITDAF (2) % Depreciation and Amortisation (85.5) (86.7) 1.2 1% Equity Accounted Earnings of Associates % Change in Fair Value of Financial Instruments (9.7) (84%) Earnings Before Net Interest Expense and Income Tax (EBIT) (7.7) (5%) Net Interest Expense (30.1) (29.0) (1.1) (4%) Income Tax Expense (29.8) (35.2) % Profit for the Period (3.4) (4%) Underlying Earnings After Tax (3) (0.2) (0%) Underlying Earnings Per Share (3) (0.47) (4%) Shareholders' Equity 2, , % (1) Includes electricity purchases. (2) Earnings before net interest expense, income tax, depreciation, amortisation, change in fair value of financial instruments and other significant items. (3) Underlying earnings after tax removes significant one-off items and the non-cash change in fair value of financial instruments. * Comparatives have been restated due to a voluntary change in accounting policy for generation plant and equipment at. EBITDAF For the six months ending 31 December 2010 ( 1H11 ), Contact s Earnings Before Net Interest Expense, Income Tax, Depreciation, Amortisation, Change in Fair Value of Financial Instruments and Other Significant Items (EBITDAF) was $225 million, consistent with the prior corresponding period ( 1H10 ). Significant increases in revenue, particularly retail electricity revenue were largely offset by ongoing increases in the costs of generation and network costs. Contact increased its revenue 12 per cent mainly through a combination of higher retail sales volumes and wholesale electricity prices and increases in generation volumes. Despite high hydrology throughout the majority of the period, average wholesale electricity prices increased $11 per megawatt hour (MWh), reflecting higher prices in December 2010 as storage levels temporarily returned to mean. Generation volumes increased five per cent to 5,482 GWh, predominantly supplied by Contact s combined-cycle gas-fired power stations.

25 Management discussion of financial results for the period ended 31 December 2010 Retail sales volumes increased by nine per cent to 4,250 GWh predominantly due to a 35 per cent increase in Time of Use sales. Time of Use customers offer the benefit of a flatter demand profile, allowing better utilisation of generation capacity and lower costs of supply. The increase in Time of Use demand has allowed Contact to reduce its exposure to wholesale spot sales and Contracts for Difference (CfDs). The benefits of these revenue increases were offset by cost increases the key components of which were gas, carbon and network costs. The half-year result was negatively impacted by increasing underlying gas costs and contracts that require gas to be purchased regardless of whether it is used in generation or sold to customers. The average gas purchase cost increased $0.86 per gigajoule (GJ) due to a significant increase in gas price from 31 December 2009 under one of Contact s main gas contracts. Total gas take-or-pay obligations increased 2.2 petajoules (PJ) in 1H11. The table below summarises how the volume of gas was used with increased generation, distressed sales and injections into storage minimising the impact of increased gas length. Total Gas Usage Volume (PJ) 1H11 1H10 T ake-or-pay obligations Gas used in generation Retail sales Wholesale (excl distressed sales) Gas length Injected into storage Loss on distressed sales Gas paid and not taken Effective from 1 July 2010 the Emissions Trading Scheme (ETS) was introduced as part of a range of measures to try to reduce New Zealand's total greenhouse gas emissions. Contact incurs carbon emission costs associated with gas used both in generation and sold to customers, LPG purchases and geothermal generation. For 1H11 this represents a total cost of $19.5 million. Network costs were $18 million (seven per cent) higher than 1H10 driven by increased Time of Use sales and an $8 per MWh increase in unit network charges for mass market customers. Contact Energy Limited / 2

26 Management discussion of financial results for the period ended 31 December 2010 Depreciation The depreciation expense decreased by $1.2 million or one per cent for the period. This largely reflected the impact of the normal periodic review of asset lives for Contact s fixed assets undertaken prior to the FY10 full year result. Change in fair value of financial instruments The reported profit for the period included a favourable non-cash pre-tax movement of $1.8 million in financial instruments. The movement was predominately driven by a favourable movement in the interest rate swap book. This compared to a favourable pre-tax movement of $11.5 million in 1H10. Interest expense The net interest expense for the period ended 31 December 2010 increased by $1.1 million or four per cent to $30.1 million. The increase in the net interest expense was primarily attributable to a decrease in interest income due to lower levels of cash held during the period offset by a lower average cost of funding. Interest of $23.4m was capitalised in the period compared to $24.0 million in 1H10. Income tax expense Income tax expense for the period was $29.8 million, down $5.4 million (15 per cent). This represents an effective tax rate of 26.3 per cent due to a reassessment of the impact of the change in corporate income tax rate (from 30 per cent to 28 per cent) on the deferred tax liability balance. Contact estimates that the effective tax rate for FY11 will be approximately 28 per cent. Reported profit 6 Months Ended 6 Months Ended 31 December December 2009* Variance $m $m $m % EBITDAF % Depreciation and amortisation (85.5) (86.7) 1.2 1% Change in fair value of financial instruments (9.7) (84%) Equity accounted earnings of associates % Net interest expense (30.1) (29.0) (1.1) (4%) Income tax expense (29.8) (35.2) % Profit for the period (3.4) (4%) * Comparatives have been restated due to a voluntary change in accounting policy for generation plant and equipment at. Net profit for the period was $83.7 million, down $3.4 million (four per cent) compared to the prior period, primarily due to the change in the fair value of financial instruments. Due to a voluntary change in accounting policy at June 2010, the comparative number for depreciation Contact Energy Limited / 3

27 Management discussion of financial results for the period ended 31 December 2010 expense in 1H10 has been restated and this has consequently restated income tax expense, Profit for the Period and Underlying Earnings. Underlying earnings after tax Underlying earnings after tax adjusts reported profit for significant one-off items and the noncash change in the fair value of financial instruments. For the period ending 31 December 2010, underlying earnings after tax was $78.8 million, down marginally ($0.2 million) from 1H10. Notable adjustments included a re-estimate of the impact of the change in the corporate income tax rate announced in the May budget and fair value movements in financial instruments. 6 Months Ended 6 Months Ended Variance 31 December December 2009* $m $m $m % Profit for the Period (3.4) (4%) Change in fair value of financial instruments (1.8) (11.5) % Income tax expense on change in fair value of financial instruments (2.9) (85%) Impact of change in corporate income tax rate (3.6) - (3.6) - Underlying earnings after tax (0.2) (0%) * Comparatives have been restated due to a voluntary change in accounting policy for generation plant and equipment at. Distributions to shareholders The Contact board of directors resolved that the interim distribution to shareholders would be the equivalent of 11 cents per share, consistent with the 1H10 distribution. The distribution represents a payout ratio of 86% of Contact s underlying earnings after tax for the period. The distribution will be made via a tax-free bonus issue under Contact s Profit Distribution Plan (PDP). Financial performance and liquidity Net debt as at 31 December 2010 was $1,416.3 million, compared with $1,347.1 million as at. This is largely due to the ongoing capital expenditure associated with the two major growth projects still under construction. Existing term debt is comprised of US$330.0 million (NZ$ million notional equivalent) of US private placements of various maturities, $550.0 million of fixed rate retail bonds and $100.0 million of fixed rate wholesale bonds which mature in May 2014 and April 2017 respectively. Contact has additional liquidity available from $520.0 million of committed bank facilities, of which $175.0 million were drawn at 31 December Contact Energy Limited / 4

28 Management discussion of financial results for the period ended 31 December 2010 Outlook The financial year to date has been marked by significant achievements with the completion of Ahuroa gas storage project and the commissioning of the Stratford Peaking project. When fully operational, these new facilities, together with a reduction in gas take-or-pay commitments will significantly increase Contact s portfolio flexibility, better enabling the company to adjust to increasingly volatile operating conditions. EBITDAF in the second half of the 2011 financial year is expected to benefit from this increased operational flexibility. Contact Energy Limited / 5

29 Jul Aug Sep Oct Nov Dec Jan Price ($/MWh) Storage (GWh) Management discussion of financial results for the period ended 31 December 2010 Overview of performance for the period Electricity market conditions The average wholesale spot price for 1H11 was $54 per MWh compared to $43 per MWh for 1H10. In general, conditions in 1H11 were very similar to 1H10 with high hydrology throughout most of the period resulting in relatively low prices on average except for a temporary increase in prices in December 2010 as storage returned to mean levels , , , , , HAY prices 1H11 HAY prices 1H10 National storage 1H11 National storage 1H10 National mean storage Contact Energy Limited / 6

30 Management discussion of financial results for the period ended 31 December 2010 Segment results The operational performance data for 1H11 (1H10 in parentheses) is provided in the chart below, and in the table on the following page. Electricity Segment Contact Energy Limited / 7