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A man claiming to be armed with a bomb in Napier is being urged by police negotiators to give himself up.
Police say the man has threatened to set off the bomb and defence force staff have been called.
Inspector Marty Parker said the man is on a bus, parked outside the Napier Travel Centre on Munroe St.
He said everyone on the bus and the travel centre had been evacuated. Fifteen houses around the centre have also been evacuated.
Police spokeswoman Kaye Calder said details of the incident were still unfolding, but that no hostages were involved.
"Police were alerted before midday when the bus driver on a scheduled service from Hastings became concerned about the behaviour of one of his passengers when he stopped outside the Napier travel centre on the outskirts of the CBD," she said in a statement.
The man's identity is not yet known and it is unclear what has prompted his actions.
Members of the police Armed Offenders Squad have cordoned off the building and Munroe St.
Police have arranged with the owners of cars parked in a property next to the travel centre to collect their vehicles.
A temporary bus stop has been set up outside the information centre on Marine Parade.
The owner of a near-by business said neighbours believe the man is still inside the bus although nothing can be seen. She said one of her neighbours used binoculars to look inside the bus but could not see anything.
"There's no noise or action in the bus," the woman said.
The woman, who did not want to be named, said there were a lot of armed police in the area.
"It's just a waiting game," she said.
The woman said police had not been in contact with her but had told other neighbours to stay in their homes.
The woman said there is a vacant property next to the travel centre that is used as a car park and there could be "mayhem" if the drama is still going on at 5pm.
Ambulances are on standby.
Munroe St is a busy commercial street and is used as a by-pass for motorists from Wellington.
InterCity Group issued a statement confirming there had been an incident on one of its buses.
It said some InterCity and Newmans coach services in the North Island had been disrupted.
Passengers should go to www.intercity.co.nz for local contact details.
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