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The 51-year-old gunman holed up in a Napier house with a high-powered rifle is a former territorial soldier with military training, according to reports.
Regular volleys of shots have been heard coming from the house throughout the siege, which has seen one policeman killed, and two officers and a civilian wounded during what police describe as a routine drug bust.
The latest shots were fired at about 3.35pm when there were three shots in succession and then another one. Two minutes later a further seven shots were fired and one was thought to have bounced off the road.
Police Commissioner Howard Broad said at a press conference late this afternoon that shots were fired directly at officers attempting to retrieve the body of Senior Constable Len Snee of Taradale from outside the house.
"I understand a number of my officers have attempted to do so under direct fire from the house at the centre of this scene," said Mr Broad.
"That would tell me that I have got some officers who have behaved extremely courageously and put themselves in harm's way."
The two other unarmed officers shot and wounded this morning, Constable Bruce Miller and Constable Grant Diver, are both in Hawke's Bay regional hospital tonight after they escaped to a neighbour's house and rescued by the Armed Offenders Squad.
Both officers have undergone surgery, and their conditions were regarded as serious but stable. The unnamed civilian is also described as in a stable condition.
Mr Snee's body remains outside the Napier house, next to his police car.
All three policemen were described as long-serving officers who were well-known in the city. Mr Snee was a member of the armed offenders squad and worked on drugs cases.
Eastern District commander Superintendent Sam Hoyle described the raid as a routine cannabis raid.
"It was a low key search warrant, probably hundreds of these occur in every city across the nation every week," Mr Hoyle said.
Mr Hoyle was questioned on how many shots were fired and what had happened inside the house.
He declined to answer those questions.
Officers have been bought in from Gisborne and other surrounding districts. "I want the people of Napier to be assured that we have the offender contained," Mr Hoyle said.
The area is still cordoned off and police are asking people to stay indoors.
Schools in the area are in "lock-down mode" and police are discussing possible evacuation plans.
Mr Hoyle said the man is in phone contact with police negotiators.
He said today's shooting was a "stark reminder" of the risks that police officers face everyday.
Mr Miller was the community constable for Ahuriri, the Napier suburb where the raid took place.
Prime Minister John Key said he had been briefed on the unfolding drama, but details at the moment were "scant".
"The first thing I'd say is that any attack on a New Zealand police officer is abhorrent.
"Our thoughts are with the families of those police officers.
Earlier, A colleague of the offender told police the man had lots of ammunition, and possibly explosives, NZPA reported.
Police said the gunman was contained in a house on the hill, which had been surrounded by the Armed Offenders Squad. No-one else is believed to be inside.
Some children have begun to be released from school in the area but those in Chaucer Rd will stay until the incident is over.
A witness told NZPA that a number of shots were fired from the house at AOS members shortly after midday. Callers to Newstalk ZB said there was repeated shooting throughout the day.
The officer's death would take the number of police killed in the line of duty in New Zealand to 29.
Napier Mayor Barbara Arnott said the district police commander had left a council meeting when he was informed.
"It's an appalling shocking incident to have here right in the heart of our city," she told Hawke's Bay Today.
"My thoughts and those of all Napier people will be with the local families affected by this tragedy."
- NZ HERALD STAFF/AGENCIES