AGL yesterday refused to comment on the market rumours, which suggest that a takeover worth about $2.5 billion is on the cards.

The Australian Financial Review has even reported that investment Bank UBS "appears to have reeled in a marlin of a mandate to advise Australian Gas Light on a potential $NZ2.9 billion acquisition of New Zealand's Contact Energy".

The company's managing director Greg Martin added fuel to the fire last week hinting at a possible move by mentioning that the company was looking at a range of opportunities in Australia and New Zealand.

In AGL's favour is the fact that Contact's majority shareholder, US energy giant Edison Mission (51%), is selling its assets around the world.

Any such takeover would be a strategy reversal for the energy utility, which quit its main electricity interests in New Zealand when NGC was caught unhedged during the 2001 electricity crisis resulting in a $300 million loss.

AGL last week reported a strong first-half performance, with the net profit reaching $206.7 million, up 8 per cent. It said it was on track for a year- to-June net profit of more than $320 million.

Contact Energy is involved in the generation, marketing and selling of electricity and gas and operates solely in New Zealand.