Powerco chief executive Steven Boulton said stage two of the project would see gas made available to approximately 38,500 of the state's smaller commercial and residential customers and that construction of the second stage would start once stage one had been completed in December next year.

The listed gas and electricity reticulator last April signed stage one agreements with the state of Tasmania to construct a natural gas network connecting large industrial users to the existing Duke Energy transmission pipeline and that construction is due to begin within the next two months.

Boulton said the 27-month stage two rollout would cost $A40-50 million depending on initial consumer connection take up and the longer-term cost was expected to be between $A65-70 million. Stage two construction was scheduled to start before February 2005 and to be completed by April 2007.

Powerco has established a project office in Launceston, with the stage one design team starting work last May.

Powerco is New Zealand's largest gas and electricity distributor in terms of network length, and largest gas distributor and second largest electricity distributor in terms of connections with approximately 400,000 consumer connections across the North Island.