Performance

highlights for hdf in 2008

FINANCIAL RESULTS

-      HDF's Earnings Before Interest Taxation Depreciation and Amortisation (EBITDA), before specified items, was $81 million, 2.8 percent higher than the comparable figure of $79 million in 2007. (1)

-      Solid operational performance from Epic Energy (Epic), with EBITDA exceeding the comparable December 2007 figure by 2.0 percent.(2)

-      South East Water (including Mid Kent Water) performed in line with expectations for the period, despite the onset of challenging macroeconomic conditions, with EBITDA for the half year to 30 September 2008 exceeding the comparable 2007 result by 1.7 percent.

-      Cash distributions of $55 million were paid to HDF securityholders during 2008, 105 percent covered by net operating cash flows from its assets.(3)

Organic developments within Epic Energy - QSN Link completed on time and on budget

-      The construction of the Queensland to South Australia/New South Wales Link (QSN Link) was completed on time and on budget in early January 2009. The QSN Link joins Epic's South West Queensland Pipeline and Epic's Moomba to Adelaide pipeline, and will also provide shippers with access to the Moomba to Sydney pipeline, thereby creating a seamless path to transport gas from the coal seam gas fields of south east Queensland to southern markets.

-      The construction of the QSN Link was underpinned by a long-term take-or-pay contract with AGL, with all spare capacity sold until 2014 and minimal capacity available until 2022. In December 2007, AGL exercised an option under the original contract committing it to the Stage 2 expansion of the South West Queensland Pipeline, which will see the addition of two new compressor stations, with gas deliveries commencing by January 2013.

South East Water merger with Mid Kent Water implemented - focus now on delivering positive regulatory price review outcome

-      In May 2007, Hastings announced its intention to merge the businesses of South East Water and Mid Kent Water following the United Kingdom Competition Commissions (UKCC) finding that the merger could proceed, subject to limited conditions. The corporate and financing steps of the merger were completed in December 2007. The newly merged business is known as South East Water Limited. The operational aspects of the merger continued to be executed over the course of 2008, with management integrated at a combined head office in Kent, customer service function internalised, and staff transferred and consolidated. Hastings believes the merger to be a positive development for the UK water industry and that significant benefits should be delivered to stakeholders over time.

-      The next regulatory price review is currently progressing in respect of the 2010-2015 period, with South East Water to submit its final business plan to the Water Services Regulation Authority (Ofwat) in April 2009. A draft determination is expected to be released in July and a final determination in November 2009. The outcome of the regulatory price review will take effect in 2010.

Distributions

-      Distributions paid to investors increased to 28.0 cents per security in 2008, an increase of 4.1 percent from the previous year.

(1) To allow comparisons with prior year's operational performance, the presentation of key financials excludes the following items:
• Unrealised revaluations, unrealised foreign exchange rate movements and other accounting revaluations (2008: loss of $18.3 million, 2007: loss of $1.5 million).
• The effect of a one-off realised derivative gain of $4.0 million in 2007 and a responsible entity incentive fee of $18.4 million in 2008.

(2) EBITDA in 2007 is exclusive of a $1.7 million credit in relation to an intra group loan forgiveness.

(3) Excludes QSN Link & Stage 3 expansion capital expenditure of $123.5 million and also excludes net financing and investing cash inflows of $138.5 million which primarily reflects debt drawn to fund QSN Link capex.

FINANCIAL highlights in 2008

To allow comparisons with prior year's operational performance, the presentation of key financials excludes the following items:

(1) Unrealised revaluations, unrealised foreign exchange rate movements and other accounting revaluations (2008: loss of $18.3 million, 2007: loss of $1.5 million) and the effect of a one-off realised derivative gain of $4.0 million in 2007.

(2) A responsible entity incentive fee of $18.4 million in 2008.

Security price and distribution history is available in the HDF Investor Centre.