GENERAL: PLU: PRE BREAK ANNOUNCEMENT

18 Jun 2010 5:18 pm

PLU 18/06/2010 GENERAL

REL: 1718 HRS Pulse Utilities New Zealand Limited

GENERAL: PLU: PRE BREAK ANNOUNCEMENT

PRE BREAK ANNOUNCEMENT

Under NZAX Listing Rule 10.2 and clause 3 of the Constitution of Pulse Utilities New Zealand Limited

18 June 2010

Proposed Transactions Pulse Utilities New Zealand Limited (Pulse) proposes to:

- issue up to 2,395,000 convertible notes for a face value of $1 per note and on the terms otherwise specified in this announcement during the 12 month period commencing on the date that is 10 business days after the date of this announcement (Note Offer); and

- issue up to 2,000,000 new ordinary shares to qualified investors for a minimum issue price of $0.50 per share from the date that is 10 business days after the date of this announcement until 30 September 2010 (Share Offer),

(together referred to as the Transactions).

Use of Pre-Break Announcement Procedure The Transactions are being effected under the Pre-Break Announcement procedure permitted by Rule 10.2 of the NZAX Listing Rules and clause 3 of Pulse's Constitution.

The Pre-Break Announcement procedure is being used because undertaking the Transactions would not comply with Rule 7.3.5 of the NZAX Listing Rules, in that, if the Transactions are fully subscribed, the aggregate number of securities allotted would exceed 25% of the number of Shares on issue prior to the Transaction occurring.

Rationale for the Transactions Pulse has a continuing need to raise funds as it establishes Pulse Energy as a competitive electricity retailer in New Zealand. Pulse Energy presently has 8,318 customers and has been adding approximately 200 customers per week for the last 5 months.

Establishing the Pulse Energy business and building its revenue base requires capital expenditure and flexibility with working capital. With new customers joining Pulse Energy, Pulse seeks to fund the manufacture and install of its smart meter technology at their premises as soon as possible. In return, customers sign up to Pulse Energy for a minimum term of six months from the time that the meter technology has been installed. Once Pulse smart meters are installed, they become revenue generating assets of Pulse with a daily charge for the smart meter levied to customers.

In addition, as new customers join Pulse it has increased working capital requirements. Pulse must purchase more electricity to supply its customers, post more security for the purchase of electricity on the electricity market and fund office resources to service new customers.

Accordingly, until Pulse has built its business to a point where it is cash flow positive it does need to continue to raise new capital to meet these working capital requirements.

Pulse has had significant success with raising the required capital to date. Pulse raised $4.25 million in a private capital raising at the end of last year, placing approximately 9.5 million shares at $0.50 per share. Pulse has also today allotted placements of approximately 2 million shares at $0.50 per share raising a further $1 million. Pulse's $4 million convertible note programme (as approved by shareholders last year) has also successfully raised another $1.77 million.

The Pulse Board has determined that Pulse needs a further to $3.5 million to fully implement its business plan in the next one to two years. The Transactions are proposed to give Pulse the issuance capacity to reach this desired level. However, the Pulse Board is also considering undertaking a rights issue or share purchase plan to all shareholders later this year to ensure that all shareholders have an opportunity to participate in the growth of Pulse and supplement the Transactions.

Note Offer At a special meeting for Pulse held in April last year, shareholders approved the issuance of up to 4,000,000 convertible notes for $1.00 per convertible note. The approval remained valid for 12 months and accordingly has now expired.

Accordingly Pulse proposes under the Note Offer:

- To have capacity to issue up to 2,395,000 notes. This is the balance of the notes approved for issue by shareholders last year that have not been allotted. - To issue the notes on the same terms that shareholders approved last year. The terms of issue are contained in an appendix to this announcement. - To issue such notes in the next 12 months.

The Note Offer is therefore effectively an extension of the prior shareholder approval to issue convertible notes for another 12 months.

Share Offer As mentioned above, Pulse has made a number of placements over the past 12 months. Under NZAX Listing Rule 7.3.5, the Board of Pulse may issue equity securities without shareholder approval provided that the number of equity securities issued is not more than 25% of the equity securities already on issue in Pulse (and calculated over a rolling twelve month period). Pulse has made numerous placements, particularly in the last six months, which has nearly fully utilised this limit.

Pulse intends to seek ratification of all placements made at its AGM which will be held in September this year. However to ensure that Pulse has the flexibility to issue shares until that time, it is seeking to authorise the Share Offer through this announcement. The Share Offer, if authorised through this announcement, will expire on 30 September 2010 when shareholders have had an opportunity to consider and vote on ratification of previous placements.

Accordingly the Share Offer may not be undertaken, it is simply to provide Pulse with flexibility should new capital be needed so that it can act quickly to secure such capital.

The terms of the Share Offer if it is undertaken will be:

Issuer Pulse Utilities New Zealand Limited Security Ordinary Shares (Shares) Issue Price A minimum of $0.50 per Share Ranking Equally with all other Shares Quotation & Transferability The Shares being offered will be quoted on the NZAX Market and transferable in the same manner as all other Shares of Pulse

Current Status of the Transactions As noted above, the Share Offer may or may not take place.

The Note Offer is ongoing although at the date of this announcement there is no agreement with new investors to issue to them convertible notes.

The Transactions are not offers of securities to the public. Under the terms of the Transactions, a person may only subscribe if they are not a 'member of the public' under the Securities Act 1978 (Act) and, in particular, they must be:

- wealthy or experienced 'eligible persons' under the Act; - relatives or close business associates of Pulse or of a director of Pulse;

- persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money; - persons who are each required to pay a minimum subscription price of at least $500,000 for the securities before the allotment of those securities; or - a person who in all the circumstances can properly be regarded as having been selected otherwise than as a member of the public.

It is not envisaged that any one investor (together with any associates) will subscribe for more than 20% of the voting securities of Pulse (thereby triggering the Takeovers Code).

At the time of any allotments under the Transactions, Pulse will make a market announcement detailing the relevant subscription in accordance with the Listing Rules.

Effect of Transactions Assuming the Share Offer is fully undertaken and subscribed for and that the number of shares on issue does not otherwise increase before such allotment date, the number of Shares on issue would increase by 7.3%.

A resulting effect on each shareholder from the Share Offer may be a dilution in their percentage shareholding in Pulse. This dilution occurs immediately when shares are issued on a non pro-rata basis. However, dilution in percentage shareholding terms does not reflect the increased prospects of Pulse following the raising of new capital.

The Note Offer is an offer of securities which may convert into Shares at the option of the subscriber. While the convertible notes are on issue, Pulse must pay interest on the convertible notes at a rate of 10% per annum. On maturity of the convertible notes, the holder may elect to redeem them for cash at their face value ($1 per note) or convert them to Shares which is determined by dividing the face value of the convertible notes by the volume weighted average market price of Shares over the 20 business days preceding maturity, less a 10% discount.

Accordingly by issuing convertible notes, Pulse is entering an obligation to pay interest on the notes and either redeem the notes at maturity or issue shares for them at maturity. If shares are issued at maturity, dilution can occur on the same basis described above.

Failure of Transaction to Proceed If the Transactions do not proceed, then Pulse will be bound by the NZAX Listing Rules, and Pulse will not issue any further equity securities unless done in accordance with the relevant NZAX Listing Rules.

Pulse would have a continuing need to raise funds to develop its business and the Board of Pulse will look to other fundraising options and potentially seek a further shareholder approval for a new method of raising funds or utilise this pre-break disclosure procedure again, to authorise a new fundraising.

Although Pulse may place shares under Listing Rule 7.3.5 without shareholder approval, it would not have sufficient allotment capacity under the terms of that rule to raise the level of capital sought through the Transactions.

Directors' Interests in the Transaction The directors hold a relevant interest the following Shares in Pulse as at the date of this announcement:

Name Shareholding % of total issued shares DP Biddlecombe 1,312,103 4.79% J van Wijk 574,406 2.10% RL Burcher 474,000 1.73%

None of the directors presently intend to subscribe under the Note Offer or the Share Offer.

Shareholder Right to Call a Shareholders Meeting As required by NZAX Listing Rule 10.2.2, the Transactions are conditional (in addition to the expiry of a 10 business day period from the date of this announcement) upon no special meeting of shareholders being called pursuant to Section 121 of the Companies Act 1993, within that 10 business day period.

Section 121 requires that the Board of Pulse call a special meeting of shareholders where, shareholders holding shares together carrying not less than 5% of the voting rights entitled to be exercised at a meeting of shareholders, submit a written request for a meeting.

Contact Details

The contact details for delivery and acceptance of a written request under section 121 of the Companies Act 1993 are:

Pulse: Pulse Utilities New Zealand Limited 201 Hobson Street Auckland 1010 Attention: Dene Biddlecombe

NZX Sponsor to Pulse: Quigg Partners PO Box 3035 Wellington Attention: Matt Yates

Directors' Certificate We the undersigned, being all of the directors of Pulse, hereby certify that in our opinion, the terms of the Transactions:

- are fair and reasonable to shareholders of Pulse; and - are in the best interests of shareholders of Pulse

on the following grounds:

- The price of Shares under the Transactions (whether through the Share Offer or on conversion of any convertible notes offered under the Note Offer) are aligned with the current market price of Shares.

- The Company has a continuing need for new capital to develop its business

- By Pulse seeking to privately raise funds under the Transactions from qualified investors, it has avoided significant transaction costs associated with a public offer under the Securities Act 1978.

- Pulse has undertaken both a Share Purchase Plan and an Entitlement Offer to shareholders since listing to give shareholders an opportunity to increase their investment in Pulse. Pulse is also considering a further offer to all shareholders later this year.

Signed by all directors of Pulse Utilities New Zealand Limited:

Joseph van Wijk

Richard Leslie Burcher

Dene Peter Biddlecombe End CA:00196287 For:PLU Type:GENERAL Time:2010-06-18:17:18:32

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