Australian Power And Gas Company Limited (ASX:APK) Agrees on Reallocation and Forward Electricity Contracts

Sydney, Sep 2, 2011 AEST (ABN Newswire) - Australian Power and Gas Company Limited (ASX:APK), an independent energy retailer, today said it agreed on electricity derivatives and 'reallocation' contracts with Macquarie Bank Limited ("Macquarie") that will significantly enhance the company's cash flow and support expansion in New South Wales.

Australian Power and Gas entered into an ex ante reallocation agreement with Macquarie that will significantly reduce the cash required for the company to meet its settlement obligations to the Australian Energy Market Operator (AEMO).

As a result of the agreement, Australian Power and Gas anticipates a substantial reduction in the cash required to fund growth in NSW in fiscal 2012.

The reallocation agreement reduces the likelihood of call notices or the need for security deposits under the national energy regulator's prudential control requirements.

In addition, APG has entered into forward electricity hedging agreements that that include over-the-counter electricity swaps that fix Australian Power and Gas' supply costs in New South Wales.

"We welcome this arrangement with Macquarie at a time when Australian Power and Gas is achieving record customer sign-ups in New South Wales," said James Myatt, CEO of Australian Power and Gas. "The deal significantly reduces our cash requirements and brings stability to our wholesale electricity costs. It means we can achieve further traction in an important new market, and forms part of the mix of arrangements that contribute to de-risking our business model."

About 30 percent of new customers have come from New South Wales in 2011 as Australian Power and Gas replicates its successful Victorian business model across the eastern seaboard. The company achieved 272,000 net customer accounts in Fiscal 2011 - an 88 percent increase on the prior year. It is targeting 400,000 net accounts by the end of June 2012.

Contact

James Myatt Australian Power & Gas Tel: +61-2-8908-2700