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Indy Directors’ Assessment Of Mission Energy Offer

2 November 2001

Independent Directors’ Assessment Of Mission Energy Five Star’s Offer

The Independent Directors of Contact Energy announced today that they are recommending to Contact shareholders that they accept the increased offer of $4.25 per share from Mission Energy Five Star Holdings (Mission).

The revised offer has been assessed by Grant Samuel & Associates Limited, the independent advisers appointed under the Takeovers Code by the Independent Directors, Mr Phil Pryke, Mr John Milne, and Mr Tim Saunders.

“Grant Samuel has assessed the merits of the offer and concluded that Mission’s offer is fair and reasonable, falling close to the mid-point of their $4.11 - $4.51 per share valuation range,” said Mr Pryke, Contact’s chairman and chairman of the Independent Directors Committee. “The offer, in Grant Samuel’s view, also represents relatively high multiples of past year revenue and earnings, and is at a premium to Contact’s pre-offer share price that is broadly consistent with other recent takeovers.”

The Independent Directors have also been advised by investment bankers Cameron & Company Limited. The offer price also falls within, but is toward the lower end of, the Cameron & Company assessed value of $4.22 - $4.66 per share.

The Independent Directors noted that the difference between the mid-point values assessed by Grant Samuel and Cameron & Company Ltd is relatively minor, being approximately 3 per cent. The Independent Directors understand that the difference arises as the net effect of a number of different assumptions made by Grant Samuel and Cameron & Company Ltd in the course of their valuation work.

“In reaching our conclusion, the Independent Directors have been mindful that there is no information to indicate that shareholders would receive a better offer, either from Mission or a competing bidder,” said Mr Pryke. “We also believe that the share price is highly likely to fall from current levels in the event that the offer fails and no competing offer emerges.

“However, we acknowledge that there is some possibility that retaining the shares might produce a higher value outcome for shareholders over the longer term.”

Contact Chair and Independent Director Phil Pryke noted that each of the Independent Directors had also been mindful of a number of risk variables that could cause the value of Contact shares to fall below the lower end of the assessed value ranges. These include the future path of wholesale electricity prices and industry structure.

“We have carefully considered the advice we have received,” said Mr Pryke. “ Based on that advice, and our assessment of Contact’s current financial position and future prospects, we have decided to recommend that, on balance, shareholders should accept the offer.”

Mr Pryke also noted that all three Independent Directors are current shareholders and would themselves accept the offer.

The Contact target company statement and the Grant Samuel report are expected to be available later today on the Contact Energy website,, after they have been delivered to Mission in accordance with the Takeovers Code.

Mission will distribute these documents to shareholders, with its offer, according to a timetable that Mission has announced.

Mr Pryke also noted that earlier today, the Contact board had resolved to pay a fully imputed interim dividend of $0.11 cents per share. Payment of this dividend ensures that shareholders receive the benefit of Contact’s accumulated imputation credits, which, if the offer succeeds, would otherwise be lost. As provided by the terms of the Mission offer, payments to accepting shareholders will be adjusted downwards by $0.11 cents per share to take account of this dividend.


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