Market Surveillance Panel Findings Welcomed
27 May 2002
Contact Energy Welcomes Market Surveillance Panel Findings
Contact Energy Ltd today welcomed the finding by the New Zealand Stock Exchange’s Market Surveillance Panel that there was no breach of the Listing Rules in the course of its investment last October in the Valley Power project.
The Panel has informed the company that it had examined the transaction, which Contact undertook with its cornerstone shareholder, Edison Mission Energy, to build a power station designed to meet peak demand in Victoria, Australia.
The Panel concluded that it had “no reason to believe that Contact’s directors have acted contrary to shareholders’ interests in respect of this transaction”, and that its structure was permitted under the Listing Rules.
“Contact has contended from the outset that this transaction was below the threshold, set out in the Listing Rules, at which an Extraordinary General Meeting would have had to be called to gain minority shareholder approval,” Contact’s chairman, Mr Phil Pryke, said.
“We have offered, and the offer has been accepted, to seek a ruling from the Market Surveillance Panel as to whether an EGM will be required if and when Contact seeks to exercise its option to acquire a further 10% interest in the Valley Power project.
“However, Contact’s Independent Directors have decided, in the intervening period, that this option to increase its ownership stake will not be exercised,” said Mr Pryke.
“While we believe that acquiring the incremental 10% would produce net financial benefits to Contact and its shareholders, this had to be weighed against the likely costs and delays involved in seeking an EGM. It takes six to eight weeks to organise an EGM and mail the relevant documentation to every shareholder. This sort of delay is not compatible with the timetable required to exercise the option. Reluctantly, Contact’s Independent Directors concluded that the option would have to be waived.”
The construction phase of the Valley Power project is almost complete, with the station expected to be fully commissioned late this month, or in early June.
The Independent Directors remain satisfied that the projected returns from the existing 40 per cent stake in the peaking plant comfortably exceed Contact’s investment criteria, and that the acquisition is in shareholders’ best interests, Mr Pryke said.