SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 9, 1996
THE SOUTHERN COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-3526 58-0690070
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
270 Peachtree Street, N.W. Atlanta, Georgia 30303
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(770) 393-0650
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On October 9, 1996, SEI Holdings, Inc. (`SEI'), an indirect,
wholly-owned subsidiary of The Southern Company ("Southern"), announced that an
agreement (the "Scheme Agreement") had been entered between SEI, Southern Energy
- - Asia, Inc. ("Southern Energy - Asia"; also an indirect, wholly-owned
subsidiary of Southern), Consolidated Electric Power Asia Limited ("CEPA") and
Hopewell Holdings Limited ("Hopewell"), providing for the acquisition by
Southern Energy - Asia of an 80% interest in CEPA (the "Acquisition").
CEPA is a Bermuda company, the shares of which are currently listed on
the Hong Kong Stock Exchange (the "HSE"). As of October 9, 1996, CEPA's majority
shareholder was controlled by Hopewell, which beneficially owned through a
number of its wholly-owned subsidiaries approximately 60.34 percent of CEPA's
issued and outstanding share capital. CEPA is engaged in the business of
developing, constructing, owning and operating electric power generation
facilities. Its current operations include installed operating capacity of
approximately 3,995 megawatts, with projects either completed or under
development in the Philippines, the People's Republic of China, Indonesia and
Pakistan. (For more information concerning CEPA, please refer to the Joint
Announcement set forth in Exhibit 99 hereto.)
Pursuant to the Scheme Agreement, when the Scheme Agreement becomes
legally effective (the "Scheme Record Date"), the currently issued shares of
CEPA will be cancelled and each holder of CEPA shares (a "CEPA Shareholder")
will receive proposals ("Proposals") entitling them to choose between either of
the following:
(a) in consideration of the cancellation of each CEPA share held by such CEPA
Shareholder, HK$18.50 per CEPA share in cash (the "Cash Option"),
consisting of a payment of HK$15.00 by Southern Energy - Asia and, as to
the remaining HK$3.50, of an amount paid by CEPA as a special
distribution (the "Special Distribution") on a pro rata basis to all CEPA
Shareholders whose CEPA shares are being cancelled;
or
(b) for every five CEPA shares held by such CEPA Shareholder, a combination of
i) in consideration of the cancellation of each of four CEPA shares out
of every five CEPA shares, four units (each, a "Cash and Contingent
Unit"), each comprising HK$16.50 per CEPA share in cash (consisting
of a payment of HK$13.00 by Southern Energy - Asia and HK$3.50 by way
of the Special Distribution) plus HK$2.00 per CEPA share in the form
of a Letter of Entitlement entitling the bearer to HK$2.00 per Cash
and Contingent Unit, to be paid when certain debt has been secured
for CEPA's Tanjung Jati project in Java, Indonesia; and
<PAGE>
ii) in consideration of the cancellation of the remaining one CEPA share
out of every five CEPA shares, one unit, consisting of one new share
of HK$6.50 in CEPA plus HK$3.50 by way of the Special Distribution;
((b)(i) and (b)(ii) together, the "Combination Option").
The Combination Option will not be available to CEPA Shareholders whose
registered addresses, as shown on the register of members of CEPA at the close
of business on the Scheme Record Date, are outside Hong Kong or who are U.S.
persons. Accordingly, only the Cash Option will be available to these persons.
Under the Scheme Agreement, 20% of CEPA's issued share capital
immediately following implementation of the Scheme Agreement has been allotted
for issuance as "New CEPA shares." However, if less than 100% of CEPA
Shareholders elect the Combination Option, then there will be excess, unissued
shares in this allotment. Therefore, CEPA Shareholders electing the Combination
Option will have the ability to apply to purchase these excess shares ("Excess
New CEPA Shares").
Pursuant to the Scheme Agreement, Hopewell has, subject to the
approval of its shareholders, irrevocably undertaken to (a) vote in favor of the
Proposals at the meeting of CEPA Shareholders to be convened by direction of the
Supreme Court of Bermuda and at the subsequent special general meeting of CEPA
Shareholders to be convened to approve the Proposals; (b) elect for the
Combination Option; and (c) apply for the maximum number of Excess New CEPA
Shares.
The legal effectiveness and implementation of the Scheme Agreement are
subject to certain conditions precedent (as set forth in the Joint Announcement
in Exhibit 99). Upon its full implementation, the Scheme Agreement will result
in Southern Energy - Asia's owning 80 percent of the issued share capital of
CEPA and in the listing of CEPA shares on the HSE being withdrawn. The total
amount that Southern Energy - Asia will pay for such 80 percent interest will be
US$2.1 billion. The Special Distribution will comprise the remaining US$600
million required to implement the Scheme Agreement. Southern Energy - Asia
currently anticipates that it will finance the Acquisition as follows: (i) 60
percent of such financing will be through nonrecourse debt, and (ii) 40 percent
will be through short-term borrowings by Southern.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Exhibit 99 : Joint Announcement
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SOUTHERN COMPANY
By /s/ Tommy Chisholm
Tommy Chisholm
Secretary
Date: October 25, 1996
Exhibit 99
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents
of this announcement, makes no representation as to its accuracy or completeness
and expressly disclaims any liability whatsoever for any loss howsoever arising
from or in reliance upon the whole or any part of the contents of this
announcement.
[logo]
HOPEWELL HOLDINGS LIMITED
(Incorporated in Hong Kong with limited liability)
[logo]
SEI HOLDINGS, INC.
(Incorporated in Delaware with limited liability)
[logo]
CONSOLIDATED ELECTRIC
POWER ASIA LIMITED
(Incorporated in Bermuda with limited liability)
JOINT ANNOUNCEMENT
PROPOSALS TO BE IMPLEMENTED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION
99 OF THE COMPANIES ACT 1981 OF BERMUDA (AS AMENDED) WHICH, IF IMPLEMENTED,
WILL RESULT IN CONSOLIDATED ELECTRIC POWER ASIA LIMITED BECOMING A SUBSIDIARY
OF SOUTHERN ENERGY-ASIA, INC.,
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF SEI HOLDINGS, INC.
AND
THE PAYMENT OF A SPECIAL DISTRIBUTION BY CONSOLIDATED ELECTRIC POWER ASIA
LIMITED TO ITS SHAREHOLDERS AND
AND
THE WITHDRAWAL BY CONSOLIDATED ELECTRIC POWER ASIA LIMITED OF THE LISTING OF
ITS SHARES ON THE STOCK EXCHANGE OF HONG KONG LIMITED
AND
A MAJOR TRANSACTION FOR HOPEWELL HOLDINGS LIMITED
INTRODUCTION
Further to the announcement made by the respective directors of
Consolidated Electric Power Asia Limited ("CEPA") and Hopewell Holdings Limited
("Hopewell") on 8th October, 1996, the directors of CEPA, SEI Holdings, Inc.
("SEI") and Hopewell jointly announce today that on 9th October, 1996 an
agreement was entered into between SEI, Southern Energy-Asia, Inc. ("Southern
Energy"), CEPA and Hopewell (the "Scheme Agreement") whereby it was agreed that
proposals (the "Proposals") be put to the holders ("CEPA Shareholders") of
issued shares of HK$10 each of CEPA ("CEPA Shares"), which if implemented, would
result, inter alia, in:--
-- Southern Energy acquiring 80 per cent. of the issued share
capital of CEPA;
-- each CEPA Shareholder receiving, at his option for his entire
holding of CEPA Shares, either:--
(a) in consideration of the cancellation of each CEPA Share
held by such CEPA Shareholder, HK$18.50 per CEPA Share in
cash (the "Cash Option"), consisting of a payment of
HK$15.00 by Southern Energy and, as to the remaining
HK$3.50, of an amount paid as a special distribution (the
"Special Distribution") on a pro rata basis to all CEPA
Shareholders whose CEPA Shares are being cancelled pursuant
to the Scheme (as defined below); or
<PAGE>
(b) for every five CEPA Shares held by such CEPA Shareholder, a
combination of:
(i) in consideration of the cancellation of each of four
CEPA Shares out of every five CEPA Shares, four units
(each, a "Cash and Contingent Unit"), each comprising
HK$16.50 per CEPA Share in cash (consisting of a
payment of HK$13.00 by Southern Energy and HK$3.50 by
way of the Special Distribution) plus HK$2.00 per
CEPA Share (a "Contingent Entitlement") in the form
of a Letter of Entitlement (as defined below); and
(ii) in consideration of the cancellation of the remaining
one CEPA Share out of every five CEPA Shares, one
unit (a "Cash and Share Unit"), consisting of one new
share of HK$6.50 (a "New CEPA Share") in CEPA to be
issued upon completion of the Scheme (as defined
below) plus HK$3.50 by way of the Special
Distribution;
((b)(i) and (b)(ii) together, the "Combination Option");
-- the listing of CEPA Shares on The Stock Exchange of Hong Kong
Limited (the "Stock Exchange") being withdrawn.
Pursuant to the Scheme Agreement, Hopewell has, subject to the approval
of its shareholders, irrevocably undertaken to (a) vote in favour of the
Proposals at the Court Meeting (as defined below) and at the Special General
Meeting (as defined below) to be convened to approve the Proposals, (b) elect
for the Combination Option and (c) apply for the maximum number of Excess New
CEPA Shares (as defined below).
BACKGROUND TO AND REASONS FOR THE PROPOSALS
The Southern Company ("Southern"), of which Southern Energy and SEI are
wholly-owned subsidiaries, has extensive operations in the power generation,
transmission and distribution sectors in the south-eastern United States and a
number of other countries and, in the financial year ended on 31st December,
1995, recorded profit after tax of approximately US$1.1 billion (equivalent to
approximately HK$8.6 billion).
Southern's business includes the development, ownership and operation
of power plants around the world. A substantial interest in CEPA offers SEI
unique opportunities to enter the Asian market place and to produce long term
earnings growth. The directors of SEI and CEPA believe that the two companies
have complementary skills that will create a much stronger combined business.
The directors of SEI believe SEI has a reputation as one of the best power plant
operators in the world. The directors of SEI consider CEPA to be the leading
developer of power plants in Asia.
<PAGE>
The directors of SEI and CEPA believe that the introduction of Southern
Energy as the controlling shareholder of CEPA will further strengthen CEPA's
competitive position in the independent power producer ("IPP") sector in Asia.
The structure of the Proposals is intended to achieve several objectives which
include:--
(a) an opportunity for CEPA Shareholders to receive cash in respect
of all of their CEPA Shares in an amount that represents a
significant premium to the audited consolidated net asset value
of CEPA as at 30th June, 1996 and the recent prices at which
CEPA Shares were traded on the Stock Exchange;
(b) for those CEPA Shareholders who wish to maintain an equity
interest in CEPA, the opportunity to do so in respect of a
minimum of 20 per cent. of their existing holding of CEPA
Shares;
(c) Hopewell's desire to remain as a significant shareholder of
CEPA; and
(d) to ensure that, if the Proposals are approved, Southern Energy
acquires an 80 per cent. ownership of CEPA.
PROPOSALS
The Proposals are intended to be implemented by way of a scheme of
arrangement (the "Scheme") under section 99 of the Companies Act 1981 of Bermuda
(as amended) between CEPA and CEPA Shareholders. It is proposed that, under the
Scheme, CEPA Shares held by CEPA Shareholders at the close of business on the
scheme record date (the "Scheme Record Date") (which is expected to be a date
prior to the date on which the appropriate filing is made with the Registrar of
Companies in Bermuda to make the sanctioning of the Scheme by the Supreme Court
of Bermuda (the "Court") legally effective) will be cancelled and each such CEPA
Shareholder will be entitled to receive, at his option for his entire holding of
CEPA Shares, either the Cash Option or the Combination Option on the following
basis:--
<PAGE>
Cash Option
For each CEPA Share held...........................HK$18.50 in cash (including
HK$3.50 in cash representing
the payment under the
Special Distribution)
CEPA Shareholders who elect the Cash Option will receive HK$18.50 per
CEPA Share in cash, consisting of, as to HK$15.00 per CEPA Share, a cash payment
by Southern Energy and, as to HK$3.50 per CEPA Share, by way of the Special
Distribution.
The total cash consideration of HK$18.50 per CEPA Share under the Cash
Option represents a premium of approximately 14.91 per cent. over the closing
price of CEPA Shares of HK$16.10 as quoted on the Stock Exchange on 7th October,
1996, being the last trading day for CEPA Shares prior to the suspension of
trading of CEPA Shares on the Stock Exchange which commenced on 8th October,
1996 (the "Suspension Date"), a premium of approximately 19.74 per cent. over
the closing price of CEPA Shares of HK$15.45 on 13th September, 1996, being the
last business day before the announcement by Hopewell and CEPA of discussions
which might lead to the disposal of part or all of Hopewell's interests in CEPA
Shares, a premium of approximately 15.84 per cent. over approximately HK$15.97
per CEPA Share, being the average closing price of CEPA Shares as quoted on the
Stock Exchange for the ten trading days immediately prior to the Suspension
Date, and a premium of approximately 79.79 per cent. over the audited
consolidated net tangible asset value per CEPA Share as at 30th June, 1996 of
approximately HK$10.29. On the basis of the total consideration of HK$18.50 per
CEPA Share under the Cash Option, the entire issued share capital of CEPA is
valued at approximately HK$24,529 million.
Combination Option
For four out of every five CEPA Shares held........HK$16.50 in cash perCEPA
Share(including HK$3.50 in
cash representing the payment
under the Special
Distribution)and a Contingent
Entitlement of HK$2.00 per
CEPA Share in the form of
a Letter of Entitlement
(as defined below)
For one out of every five CEPA Shares held.........One new CEPA Share and
HK$3.50 in cash (representing
the payment under the Special
Distribution)
<PAGE>
All New CEPA Shares to be issued under the Scheme will carry the right
to receive all dividends and distributions declared, paid or made after the
effective date of the Scheme but excluding the proposed final dividend of
HK$0.15 per CEPA Share for the financial year ended 30th June, 1996.
Under the Combination Option, a CEPA Shareholder holding five CEPA
Shares will therefore become entitled to receive in aggregate HK$69.50 in cash,
a Contingent Entitlement totalling HK$8.00 in the form of a Letter of
Entitlement (as defined below) and one New CEPA Share. The cash element of such
consideration will be met, as to HK$52.00, by Southern Energy and, as to
HK$17.50, by the Special Distribution.
The Combination Option will not be available to CEPA Shareholders whose
registered addresses, as shown on the register of members of CEPA at the close
of business on the Scheme Record Date, are outside Hong Kong or who are U.S.
persons. As such, only the Cash Option will be available to them. Also, pursuant
to the new Bye-Laws of CEPA (summarised in the section headed "Bye-Laws of CEPA"
below), each registered holder of New CEPA Shares must be the legal and
beneficial owner of such shares.
Under the Proposals, a CEPA Shareholder holding one board lot of 200
CEPA Shares will be entitled to the following consideration:--
Cash Option or Combination Option
Special Distribution HK$700 HK$700
Cash HK$3,000 HK$2,080
Contingent Entitlement N/A HK$320
New CEPA Shares N/A 40 New CEPA Shares
TOTAL HK$3,700 HK$2,780 in cash, a
Contingent Entitlement
totalling HK$320
and 40 New CEPA Shares
Contingent Entitlement
CEPA currently holds, through a wholly-owned subsidiary, 80 per cent.
of the issued share capital of PT CEPA Indonesia. PT CEPA Indonesia is the
project company that owns a 2 x 660 megawatt power plant in Tanjung Jati, Java,
Indonesia (the "Tanjung Jati Plant") which is intended to be constructed on a
build-operate-transfer basis. Construction is currently estimated to be
completed in the year 2000. PT CEPA Indonesia had an aggregate paid up capital
of HK$487.50 million as at 30th June, 1996. In September 1994, a power purchase
agreement was signed with PT PLN (Persero), the Indonesian state owned
electricity corporation, for the construction, operation and maintenance of the
Tanjung Jati Plant. The co-operation period is for 30 years commencing from the
contractual completion date of the Tanjung Jati Plant. Discussions are
continuing with a view to finalising the outstanding contractual and financing
arrangements.
<PAGE>
The Contingent Entitlement of HK$2.00 per Cash and Contingent Unit will
be represented by letters of entitlement issued by Southern Energy (the "Letters
of Entitlement"). Payment under the Letters of Entitlement is conditional on,
and will be paid 21 days after Limited Recourse Debt (as defined below) in an
amount at least equal to two-thirds of the expected total costs of the Tanjung
Jati Plant, which total costs are currently estimated to be approximately
US$1,800 million (equivalent to approximately HK$14,040 million), shall have
been secured for the purposes of the Tanjung Jati Plant by PT CEPA Indonesia or
one of its subsidiaries or holding companies, and all conditions to the making
of advances under the relevant financing agreements shall have been satisfied or
otherwise waived by the lenders. "Limited Recourse Debt" for the purposes of the
Contingent Entitlement shall mean financing arrangements which are established
upon terms which do not require CEPA, or its shareholders, or other members of
CEPA, its subsidiaries and associated companies, other than PT CEPA Indonesia,
to incur any material liability other than liabilities upon terms approved by
CEPA.
If the above condition is not satisfied by 30th June, 1998, the right
to the payment of the Contingent Entitlement will lapse as will all of Southern
Energy's obligations under the Letters of Entitlement. Hence, the Contingent
Entitlement will cease to have any value. Each Letter of Entitlement represents
a conditional contractual right to receive the relevant amount of Contingent
Entitlement from Southern Energy and will be executed by Southern Energy under
its corporate seal or on behalf of Southern Energy by a duly authorised
signatory. The Letters of Entitlement and the rights thereunder will only be
transferable in limited circumstances such as the death or bankruptcy of the
holder.
Although no assurances can be given that the above condition will be
satisfied, the existing and the future board of directors of CEPA (as the case
may be) will, before and after the Scheme has been implemented, use reasonable
efforts to procure satisfaction of such condition before 30th June, 1998.
Whether or not such condition is satisfied will depend upon the outcome of
existing and future negotiations between CEPA and interested parties in relation
to the Tanjung Jati Plant. In conducting such discussions the existing and the
future board of directors of CEPA (as the case may be) will have regard to
various factors including the anticipated financial returns from such project,
in relation to which the obligations under the Letters of Entitlement will be a
material consideration. The Letters of Entitlement will contain limited
provisions for modification with the approval of 75 per cent.
in value of holders of the Letters of Entitlement.
<PAGE>
Excess New CEPA Shares application option
Under the Proposals, a maximum of 20 per cent. of CEPA's issued share
capital immediately following the implementation of the Scheme will be available
for allotment to all CEPA Shareholders who elect for the Combination Option. To
the extent that one or more CEPA Shareholders elect for the Cash Option, the
number of New CEPA Shares which would otherwise have been available to such CEPA
Shareholders (the "Excess New CEPA Shares") will be available for application by
CEPA Shareholders who elect for the Combination Option. Applications for Excess
New CEPA Shares will not be available to CEPA Shareholders who elect for the
Cash Option. If a CEPA Shareholder who elects for the Combination Option wishes
to apply for such Excess New CEPA Shares, he may do so only in respect of his
entire holding of CEPA Shares. Each CEPA Shareholder whose application for
Excess New CEPA Shares is successful, whether in full or in part, will (a) for
each Excess New CEPA Share issued to him effectively have exchanged one Cash and
Contingent Unit for an extra Cash and Share Unit and (b) receive the remaining
Cash and Contingent Units to which he was originally entitled.
In the event the number of Excess New CEPA Shares is insufficient to
satisfy applications for such shares, allocations of Excess New CEPA Shares will
be made to CEPA Shareholders who elect for the Combination Option and apply for
such Excess New CEPA Shares pro rata based on the respective number of Excess
New CEPA Shares applied for by each CEPA Shareholder (rounded down to the
nearest whole number).
Share option proposals
To the extent that holders of options under CEPA's employee share
option scheme exercise their share options and become CEPA Shareholders and
remain so as at the close of business on the Scheme Record Date, they will be
entitled to elect to receive either of the forms of consideration under the
Scheme. Holders of share options who do not exercise their options in such
manner will be entitled to receive a cash payment from Southern Energy
equivalent to the value of the Cash Option less the exercise price of the share
option.
<PAGE>
CONDITIONS OF THE PROPOSALS
The Proposals are conditional upon the Scheme becoming effective by not
later than 14th February, 1997 or such later date as Southern Energy and CEPA
may agree and the Court may allow.
The Scheme is conditional upon:--
(a) the approval by a majority in number representing three-fourths
in value of the holders of the CEPA Shares present and voting,
either in person or by proxy, at the meeting of CEPA
Shareholders to be convened by direction of the Court (the
"Court Meeting");
(b) the necessary special resolutions required to implement the
Scheme, including a proposed reduction of share capital of CEPA
being duly passed by a majority of three-fourths of the votes
cast by holders of CEPA Shares present and voting, either in
person or by proxy, at a special general meeting of CEPA (the
"Special General Meeting") to be held immediately after the
Court Meeting;
(c) the reduction of capital procedure and all other matters
relating to the payment of the Special Distribution provided for
in the Companies Act 1981 of Bermuda (as amended) being complied
with and completed;
<PAGE>
(d) the consent of the Bermuda Monetary Authority having been
received for the issue of the New CEPA Shares;
(e) the sanction (with or without modification) of the Scheme and a
copy of the Order of the Court being delivered for registration
to the Registrar of Companies in Bermuda;
(f) shareholders of Hopewell (the "Hopewell Shareholders")
approving, at the extraordinary general meeting convened for
that purpose, the Proposals and the steps required on the part
of Hopewell to permit implementation of the Proposals;
(g) the obtaining of all consents, clearances, authorisations and
approvals which are necessary for any member of the Group (as
the term is defined in the Scheme Agreement, the "CEPA Group")
to obtain for or in respect of the implementation of the Scheme
and the resulting change of control of the CEPA Group to ensure
that as a result thereof:--
(i) no material amounts of money borrowed by, and no material
indebtedness, actual or contingent, of any member of the
CEPA Group are or become repayable or capable of being
declared repayable immediately or earlier than the stated
repayment date (and in respect of which no alternative
arrangements are substituted on terms which are not
materially less favourable);
(ii) no member of the CEPA Group is prevented from borrowing
material amounts of money or incurring material
indebtedness generally or under any existing arrangements
(and in respect of which no alternative arrangements are
substituted on terms which are not materially less
favourable); and
<PAGE>
(iii) no agreement, arrangement, licence, permit, franchise or
other instrument which is material to any member of the
CEPA Group is terminated;
which individually or in aggregate has a material adverse effect
on the current or future financial position of the CEPA Group
taken as a whole;
(h) Hopewell obtaining all consents, clearances, authorisations,
approvals or waivers required from its banks to enable it to
attend and vote at the Court Meeting and the Special General
Meeting and/or to enable CEPA Shares to be cancelled pursuant to
the Scheme;
(i) no government or governmental, quasi-governmental, statutory or
regulatory body or court or any other similar person having
jurisdiction over SEI or any member of its group having taken,
instituted or implemented any action or steps or enacted, made
or proposed any statute, regulation or order or taken any other
step that does or would upon taking effect either prohibit or
prevent SEI and/or Southern Energy from participating in the
Proposals and/or make the Proposals illegal, void or
unenforceable;
(j) no government or governmental, quasi-governmental, statutory or
regulatory body or court or any other person or body having
jurisdiction over, or the ability to materially adversely affect
the business of, the CEPA Group, having taken, instituted or
implemented any action, or steps or enacted or made or proposed
any statute, regulation or order or otherwise taken any steps
that does or would upon taking effect:--
(i) prohibit or prevent the implementation of the Proposals
or make the Proposals illegal, void or unenforceable;
<PAGE>
(ii) result in the condemnation, nationalisation, seizure or
other expropriation of all or a material part of the
property, assets or business of the CEPA Group which has a
material adverse effect on the current or future financial
position of the CEPA Group taken as a whole; and
(iii) result in the CEPA Group having to stop, suspend or
interrupt the operation or development of all or a
material part of the business of the CEPA Group, which has
a material adverse effect on the current or future
financial position of the CEPA Group taken as a whole;
(k) there not having occurred:--
(i) any change in relevant political, economic or fiscal
conditions or exchange controls;
(ii) any act of God, war, riot, civil commotion, fire, flood,
explosion or terrorism; or
(iii) the imposition of economic sanctions by the United States;
which individually or in aggregate has a material adverse effect
on the current or future financial position of the CEPA Group
taken as a whole;
(l) CEPA having cash balances of no less than US$600 million
(equivalent to approximately HK$4,640 million) immediately prior
to the time the Scheme becomes effective. For this purpose,
"cash" means cash in hand, deposits with banks and short-term
cash investments being in each case readily available in cash to
CEPA; and
(m) all conditions precedent to financial closing under the credit
agreements relating to CEPA's power project at Sual, the
Philippines, shall have been satisfied, waived or modified in a
manner satisfactory to the lenders, including, without
limitation, any condition precedent involving the project site,
transmission facilities or the execution of a supplemental
energy conversion agreement governing an additional 200
megawatts of capacity.
<PAGE>
For the purposes of determining whether any event or circumstance which
relates to the Tanjung Jati Plant has a material adverse effect on the current
or future financial position of the CEPA Group taken as a whole, regard shall be
made to the contingent nature of amounts payable pursuant to the Contingent
Entitlement.
SEI reserves the right to waive all or any of the conditions set out in
paragraphs (g) to (m) above, in whole or in part, for the purposes of the
Scheme. In addition, SEI has agreed with Hopewell that if Hopewell requests it
to do so it will waive the condition set out in paragraph (h) subject to SEI
being satisfied that the absence of the relevant consents, clearances,
authorisations or waivers will not have a material adverse effect on the current
or future financial position of the CEPA Group taken as a whole.
Assuming that all of the conditions to the Proposals referred to above
are fulfilled, it is expected that the Scheme will become effective on or before
31st January, 1997 and CEPA Shareholders will be notified by press announcement
of the exact date on which the Scheme becomes effective. Application will be
made to the Stock Exchange for the withdrawal of the listing of the CEPA Shares
on the Stock Exchange, as the percentage of New CEPA Shares held by the public
will be below the minimum requirement prescribed by the Rules Governing the
Listing of Securities on the Stock Exchange (the "Listing Rules"). Therefore
upon the Scheme becoming effective, the listing of CEPA Shares on the Stock
Exchange will be withdrawn. It is not Southern Energy's intention to
obtain a listing for New CEPA Shares on any other exchange or to procure
that there is any independent facility open to shareholders to trade New
CEPA Shares, immediately following the implementation of the Scheme.
If the Scheme has not become effective by 14th February, 1997 (or such
later date as SEI and CEPA may agree and the Court may allow), the Proposals
will lapse and CEPA Shareholders will be notified by press announcement as soon
as practicable thereafter.
<PAGE>
INFORMATION ON CEPA
CEPA is engaged in the business of developing, constructing, owning and
operating electric power generation facilities and has established itself as one
of the leading IPP groups in the Asian region with an installed operating
capacity of approximately 3,995 megawatts with a further 2,520 megawatts of
capacity under construction. CEPA operates or is in the course of developing
power generation facilities in four Asian countries comprising the Philippines,
the People's Republic of China, Indonesia and Pakistan. CEPA has extensive
experience and knowledge of Asian markets and has a demonstrable track record in
winning and developing IPP projects.
For the two financial years ended 30th June, 1996, the audited
consolidated profits of CEPA before taxation, minority interests and
extraordinary items; and after taxation but before minority interests and
extraordinary items, were approximately HK$617 million and HK$596 million
respectively for 1995 and approximately HK$682 million and HK$669 million
respectively for 1996. The audited consolidated net profits of CEPA attributable
to minority shareholders for 1995 and 1996 were each approximately HK$31
million. For the two financial years ended 30th June, 1996, there were no
extraordinary items in relation to the earnings of CEPA. The audited
consolidated net asset value of CEPA as at 30th June, 1996 was approximately
HK$14,381 million.
CEPA after implementation of the Scheme
In the event the Scheme is implemented, CEPA will become an 80 per
cent. owned subsidiary of Southern Energy. Hopewell will become a minority
shareholder in CEPA with an equity interest of between approximately 12.1 per
cent. and 20.0 per cent. in CEPA's issued share capital depending on the extent
to which CEPA Shareholders, other than Hopewell, elect for the Cash Option or
the Combination Option and the extent to which Excess New CEPA Shares are
applied for.
CEPA will be an unlisted company with the characteristics of a private
company, and any new issue or transfer of shares will be subject to the approval
of the Bermuda Monetary Authority. In addition, depending on the number of
holders of New CEPA Shares, the Securities and Futures Commission may determine
that CEPA shall continue to be subject to the Hong Kong Codes on Takeovers and
Mergers. As a result of the Special Distribution, CEPA's capital will be
reduced by an aggregate amount of approximately HK$4,641 million. Based
on CEPA's audited consolidated net assets as at 30th June, 1996 the
implementation of the Scheme will reduce CEPA's audited consolidated net assets
from approximately HK$14,381 million to approximately HK$9,740 million.
<PAGE>
The business of the CEPA Group after implementation of the Scheme will
not be materially different from its current business. Upon implementation of
the Scheme, Hopewell and its affiliates (as defined in the Scheme Agreement)
will be subject to non-competition undertakings which will prohibit them (with
very limited exceptions, including through Hopewell's interests in CEPA) from
directly or indirectly participating in any capacity in any power project
anywhere in the world or in the generation, distribution or transmission of
electricity in Asia. SEI will also undertake to Hopewell and CEPA to carry on
its power projects and generation, distribution or transmission of electricity
in Asia including (subject to obtaining all necessary consents for the transfer
of SEI's interests to the CEPA Group) SEI's existing projects through CEPA.
In the event the Scheme is implemented, Mr. Gordon Wu and Mr. Stewart
Elliott have agreed to remain as executive chairman, and chief executive officer
and managing director respectively of CEPA. As at the date of this announcement
both CEPA and Southern Energy have not reached a decision as to the engagement
of the remaining members of the board of directors of CEPA.
Bye-Laws of CEPA
In the event the Scheme is implemented, the existing Bye-Laws of CEPA
will be amended and post-amendment will be in a form usual for unlisted
companies in Bermuda but will include the following features in order to provide
protection for minority shareholders of CEPA:--
(a) The shareholders will have pre-emption rights in respect of any
transfer of shares except in the case where the transfer is to
an entity wholly-owned by the transferor, or in the case where a
shareholder offers its shares in connection with obtaining a
listing of CEPA's shares on the Stock Exchange or on such other
exchange as may be determined by unanimous resolution of the
board of directors of CEPA (a "Listing").
(b) If the majority shareholder (initially Southern Energy) sells 35
per cent. or more of the issued shares of CEPA to a third party,
the other shareholders will each have the right to require the
majority shareholder to procure the third party to buy their
shares on the same terms. This would not apply if the majority
shareholder offers its shares in connection with a Listing.
(c) The shareholders will have pre-emption rights in relation to any
new issue of shares.
(d) At any time after three years from the date the new Bye-Laws are
adopted, if shareholders who in aggregate hold not less than 10
per cent. of the issued shares wish to sell their shares, the
majority shareholder will be obliged either to buy the shares or
assist these shareholders in the implementation of a Listing.
<PAGE>
(e) The majority shareholder will have the right to appoint such
number of directors as it wishes. Each shareholder (other
than the majority shareholder) holding at least five per cent.
of the issued shares can nominate a person to be a
director of CEPA and if more than one person is nominated, one
such person will be elected as a director by simple
majority vote on a poll of the shareholders (other than the
majority shareholder). In the event such voting procedure
does not result in the election of a person nominated by a
shareholder (other than the majority shareholder) holding
10 per cent. or more of the issued shares, such shareholder will
have the right to appoint a further person to be a
director of CEPA. Therefore, initially, there will, in all
likelihood, be a minimum of one and a maximum of two
directors on the board of directors of CEPA appointed by
shareholders other than Southern Energy.
(f) The following will require unanimous board approval:--
(i) CEPA engages in or carries on any business which is not
part of the power business;
(ii) CEPA purchases, cancels or converts any of its share
capital, or reduces any of its share capital, share
premium account or reserves, or in any way alters the
rights attaching to any class of shares;
(iii) CEPA issues or allots any securities convertible into or
carrying a right of subscription in respect of shares or
any share warrants or issues or grants any options or
other rights over or in respect of any share or which may
require the issue of shares in the future (except in the
case where such action is required to meet specific
funding requirements of CEPA);
(iv) CEPA issues any debenture or other debt securities which
carry or in certain circumstances carry voting rights in
CEPA (except in the case where such action is required to
meet specific funding requirements of CEPA);
(v) any sale, transfer, lease, assignment or other disposition
of (A) any undertaking, property and/or assets of CEPA or
any of its subsidiaries, the value of which is in excess
of 25 per cent. of the consolidated net asset value of
CEPA and its subsidiaries as shown in CEPA's last audited
accounts published prior to the transaction; or (B) all or
a substantial part of CEPA's interests in any power
project, or in respect of either (A) or (B), any contract
so to do;
<PAGE>
(vi) any connected party transaction (as defined in Rule
14.23(1) of the Listing Rules) and applied as if CEPA were
a listed issuer on the Stock Exchange; and
(vii) any equity fund raising other than to meet specific
funding requirements of CEPA.
(g) Any amendment to CEPA's Memorandum of Association or Bye-Laws or
any reduction or reorganisation of CEPA's share capital or
business proposed by any scheme of arrangement will require a
special resolution adopted by not less than 90 per cent. of the
votes cast by shareholders present and voting, either in person
or by proxy, in a general meeting.
INFORMATION ON SOUTHERN
SEI is a direct wholly-owned subsidiary of Southern. Southern is the
largest producer of electricity in the United States, generating more than 146.5
billion kilowatt - hours at its United States facilities in 1995. Its operating
affiliates supply energy to a 122,000 square mile United States service
territory spanning most of Georgia, Alabama, Southeastern Mississippi, and the
panhandle region of Florida, an area with a population of approximately 11
million. It operates more than 36,000 megawatts of electrical generating
capacity in the United States and an additional 2,400 megawatts abroad. Through
its various subsidiaries, Southern also supplies electricity to customers in a
number of other states in the United States and in Argentina, England, Chile,
the Bahamas and Trinidad and Tobago.
Southern reported 1995 revenues of US$9.18 billion (equivalent to
approximately HK$71.18 billion) and net income of US$1.1 billion (equivalent to
approximately HK$8.6 billion), and total assets of more than US$30.0 billion
(equivalent to approximately HK$234 billion). Its shares are traded on the New
York Stock Exchange and it is one of the most widely held corporate stocks in
the United States. Southern employs approximately 26,500 people in the United
States, and approximately 31,900 people world-wide.
Southern operates other businesses through its wholly-owned
subsidiaries, Southern Communications Services, Inc., which provides digital
wireless communication services to Southern's operating affiliates and markets
these services to the public within the Southeast United States; Southern
Nuclear Operating Company, Inc., which provides services to Southern's nuclear
plants; and the Southern Development and Investment Group, Inc., which explores,
develops and markets energy management services and other business lines
relating to Southern's core business of generating and distributing energy.
Southern continues to consider new business opportunities, particularly
those which allow use of the expertise and resources developed through its
regulated utility experience. These endeavours began in 1981 and are conducted
through SEI and other subsidiaries. SEI's primary business focus is
international and domestic cogeneration, the independent power market, and the
privatisation and development of generation, transmission and distribution
facilities in the international market. During 1995, Southern also entered the
business of power marketing through Southern Energy Marketing, Inc..
<PAGE>
In September 1995, SEI acquired South Western Electricity Plc.
("SWEB"), one of the United Kingdom's 12 regional electricity distribution
companies, for approximately US$1.8 billion (equivalent to approximately HK$14.0
billion). SWEB's main business is the distribution of electricity to customers
in the Southwest of England. Based in Bristol, SWEB serves approximately 1.3
million customers in an area with almost two million residents. SWEB is also a
supplier of electricity to franchised customers in its authorised area and to
customers in the competitive second tier market.
As at the date of this announcement (save for Morgan Stanley & Co.
Incorporated or its affiliates (together "Morgan Stanley"), the financial
adviser to SEI, who are deemed to be parties acting in concert with SEI under
the Code) neither SEI nor any person acting in concert with SEI was interested
in, directly or beneficially, any CEPA Shares. SEI is an independent third party
not acting in concert with the directors, chief executives, substantial
shareholders of CEPA or Hopewell and/or any of the subsidiaries of CEPA or
Hopewell and/or any of their respective associates.
Neither SEI nor any person acting in concert with it (save for Morgan
Stanley) has dealt, directly or indirectly, in any securities of CEPA during the
period commencing six months prior to the date of this announcement. Details of
the relevant holdings and dealings in the securities of CEPA under the Codes
will be disclosed in the scheme circular.
INFORMATION ON HOPEWELL
Hopewell is engaged in the business of transportation infrastructure
and property development and investment, civil and building construction,
project investment and management, and power stations operations through CEPA.
As at the date of this announcement, Hopewell, the controlling
shareholder of CEPA, beneficially owned, through a number of wholly-owned
subsidiaries, 800 million CEPA Shares, representing approximately 60.34 per
cent. of the entire issued share capital of CEPA. Based on the Cash Option,
Hopewell's interests in CEPA is valued at approximately HK$ 14,800 million. The
consolidated net asset value of CEPA attributable to Hopewell, based on the
audited consolidated net assets of Hopewell as at 30th June, 1996, was
approximately HK$8,230 million. The consolidated profits before and after
taxation, extraordinary items and minority interests attributable to Hopewell
through its interests in CEPA were approximately HK$310 million and HK$284
million respectively for the financial year ended 30th June, 1995 and
approximately HK$396 million and HK$370 million respectively for the financial
year ended 30th June, 1996. Under the Scheme Agreement, Hopewell has irrevocably
undertaken (subject to the approval of Hopewell Shareholders) to (a) exercise
the voting rights attaching to the CEPA Shares held by Hopewell to vote in
favour of the Scheme at the Court Meeting and at the Special General Meeting,
(b) elect for the Combination Option and (c) apply for the maximum number of
Excess New CEPA Shares. As a result, if the Scheme is implemented, Hopewell will
hold not less than approximately 12.0 per cent. and not more than approximately
20.0 per cent. of CEPA's issued share capital depending on the extent to which
other CEPA Shareholders elect for the Combination Option and make applications
for Excess New CEPA Shares.
<PAGE>
Effect of the Proposals on Hopewell
In the event the Scheme is implemented, and assuming that its
application for Excess New CEPA Shares is wholly unsuccessful, the aggregate
consideration receivable by Hopewell pursuant to the Combination Option in
respect of its holding of 800 million CEPA Shares will be approximately
HK$11,120 million in cash (comprising HK$8,320 million as a cash payment by
Southern Energy, HK$2,800 million by way of the Special Distribution), HK$1,280
million as a Contingent Entitlement and 160 million New CEPA Shares representing
approximately 12.1 per cent. of the issued share capital of CEPA. Should
Hopewell's application for Excess New CEPA Shares be wholly successful, the
consideration receivable by it would be approximately HK$9,753 million in cash
(comprising approximately HK$6,953 million as a cash payment by Southern Energy
and HK$2,800 million by way of the Special Distribution), HK$1,070 million as a
Contingent Entitlement and approximately 265.17 million New CEPA Shares
representing approximately 20.0 per cent. of the issued share capital of CEPA.
It is the current intention of the directors of Hopewell to maintain
Hopewell's holding of New CEPA Shares as a long term strategic investment. The
cash consideration receivable by Hopewell pursuant to the Scheme of between
HK$9,753 million and HK$11,120 million (excluding the Contingent Entitlement)
will be applied by Hopewell in the reduction of its borrowings and for general
working capital and investment purposes. Based on the audited consolidated
financial statements of Hopewell as at 30th June, 1996, if the Proposals are
implemented, Hopewell's pro forma gearing will be reduced from approximately
92.35 per cent. to between approximately 23.22 per cent. and 28.93 per cent.
depending on the extent Hopewell is successful in respect of its application for
Excess New CEPA Shares, (excluding the value attributable to the Contingent
Entitlement). Hopewell's pro forma net tangible assets per share will increase
from HK$5.35 per share to between approximately HK$6.1 and HK$6.2 per share
(excluding the value attributable to the Contingent Entitlement), depending on
the extent Hopewell is successful in respect of its application for Excess New
CEPA Shares.
The board of directors of Hopewell intends to continue the development
of Hopewell's business of infrastructure project investment and development,
property investment and development and hotel operation, in the high growth
regions of South East Asia. Hopewell has a number of major projects under
planning and construction which include the Guangzhou East-South-West Ring Road
in the People's Republic of China, the Bangkok Elevated Road and Train System in
Thailand, the proposed South Luzon Expressway in the Philippines and the Mega
Tower Hotel development in Hong Kong. In the longer term, Hopewell intends to
develop related property projects along and adjacent to its transportation
infrastructure projects. The implementation of the Proposals will allow Hopewell
to strengthen its capital base through a reduction of borrowings and therefore
enhance its financial position and provide it with more flexibility to pursue
other investments. At the same time, the Proposals will also allow Hopewell to
continue to participate in the development of the power sector in Asia through
its retained interests in CEPA as a minority shareholder.
<PAGE>
The Proposals, if implemented, will be deemed a realisation of assets
and will constitute a major transaction for Hopewell under the Listing Rules and
will be subject to obtaining the approval of Hopewell Shareholders at an
extraordinary general meeting.
PRELIMINARY ANNOUNCEMENTS OF RESULTS OF CEPA AND HOPEWELL FOR THE FINANCIAL YEAR
ENDED 30TH JUNE, 1996
Your attention is drawn to the preliminary announcements made today by
the respective boards of directors of CEPA and Hopewell of the results of CEPA
and Hopewell respectively for the financial year ended 30th June, 1996.
GENERAL MATTERS RELATING TO THE PROPOSALS
Peregrine Capital Limited has been appointed to advise CEPA and
Hopewell in respect of the Proposals and Morgan Stanley has been appointed to
advise SEI in respect of the Proposals. Morgan Stanley is satisfied that
sufficient financial resources are available to Southern Energy for the
implementation of the Proposals.
An independent board committee (the "Independent Board Committee") will
be appointed by the board of directors of CEPA to advise CEPA Shareholders in
connection with the Proposals. An independent financial adviser (the
"Independent Adviser") will also be appointed to advise the Independent Board
Committee in connection with the Proposals.
Hopewell and CEPA understand that the respective directors of Hopewell
and/or CEPA who hold shares in Hopewell and/or CEPA intend to vote in favour of
the Proposals at the relevant Hopewell meeting and at the relevant CEPA meetings
to be convened to approve the Proposals.
<PAGE>
The trading of the securities of Hopewell and CEPA on the Stock
Exchange was suspended between 8th October, 1996 and 10th October, 1996.
Hopewell and CEPA have made applications to the Stock Exchange for the
resumption of trading of the shares of Hopewell and of CEPA on the Stock
Exchange as of 10:00 a.m. on 11th October, 1996. CEPA Shareholders, Hopewell
Shareholders and potential investors should be aware that the Proposals are
subject to certain conditions being fulfilled as referred to above and as such
may not become unconditional. Accordingly, CEPA Shareholders, Hopewell
Shareholders and potential investors are advised to exercise caution when
dealing in CEPA Shares and/or Hopewell Shares.
A document containing further details of the Proposals, the
advice of the Independent Adviser and incorporating notices of the relevant
meetings will be despatched to CEPA Shareholders as soon as practicable.
A circular containing further details of the Proposals and the notice
convening an extraordinary general meeting of Hopewell Shareholders in
connection with the Proposals will be despatched to Hopewell Shareholders as
soon as practicable.
<PAGE>
By Order of the Board
HOPEWELL HOLDINGS LIMITED
Peter Yip Wah LEE
Company Secretary
By Order of the Board
CONSOLIDATED ELECTRIC POWER ASIA LIMITED
Peter Yip Wah LEE
Company Secretary
By Order of the Board
SEI HOLDINGS, INC.
Thomas G. BOREN
President and CEO
<PAGE>
Hong Kong, 10th October, 1996
The directors of CEPA and Hopewell jointly and severally accept full
responsibility for the accuracy of the information relating to CEPA and Hopewell
respectively contained in this announcement and confirm, having made all
reasonable inquiries, that to the best of their knowledge, their opinions
expressed in this announcement have been arrived at after due and careful
consideration and there are no other facts not contained in this announcement,
the omission of which would make any statement in this announcement misleading.
The directors of SEI jointly and severally accept full responsibility for the
accuracy of the information relating to Southern, SEI and Southern Energy and
their intentions with regard to the CEPA Group as contained in this announcement
and confirm, having made all reasonable inquiries, that to the best of their
knowledge, their opinions expressed in this announcement have been arrived at
after due and careful consideration and there are no other facts not contained
in this announcement, the omission of which would make any statement in this
announcement misleading.
