<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
---------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission File Number 1-13434
EDISON MISSION ENERGY
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4031807
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18101 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 752-5588
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES x NO _______
------
Number of shares outstanding of the registrant's Common Stock as of May 13,
1999: 100 shares (all shares held by an affiliate of the registrant).
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I - FINANCIAL INFORMATION
1. Financial Statements................................................ 1
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 13
PART II - OTHER INFORMATION
5. Other Information................................................... 23
6. Exhibits and Reports on Form 8-K.................................... 23
PART III
Signatures.......................................................... 24
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
OPERATING REVENUES
Electric revenues $ 196,853 $ 198,797
Equity in income from energy projects 60,745 17,567
Equity in income from oil and gas 3,642 5,465
Operation and maintenance services 8,516 10,077
-------------- -------------
Total operating revenues 269,756 231,906
-------------- -------------
OPERATING EXPENSES
Fuel 54,075 48,637
Plant operations 34,371 29,598
Operation and maintenance services 6,470 7,391
Depreciation and amortization 24,146 22,782
Administrative and general 36,497 24,172
-------------- -------------
Total operating expenses 155,559 132,580
-------------- -------------
Income from operations 114,197 99,326
-------------- -------------
OTHER INCOME (EXPENSE)
Interest and other income 7,792 13,776
Interest expense (44,519) (45,725)
Dividends on preferred securities (3,233) (3,297)
-------------- -------------
Total other income (expense) (39,960) (35,246)
-------------- -------------
Income before income taxes 74,237 64,080
Provision for income taxes 16,301 26,380
-------------- -------------
INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE $ 57,936 $ 37,700
Cumulative effect on prior years of change in
accounting for start-up costs (13,840) -
-------------- -------------
NET INCOME $ 44,096 $ 37,700
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1999 1998
----------- ----------
<S> <C> <C>
NET INCOME $ 44,096 $ 37,700
Other comprehensive income (expense), net of tax:
Foreign currency translation adjustments, net of income
tax benefit (expense) of $1,378 and $(1,099) in 1999
and 1998, respectively (12,625) 8,315
----------- ----------
COMPREHENSIVE INCOME $ 31,471 $ 46,015
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 387,119 $ 459,178
Accounts receivable - trade 94,042 74,403
Accounts receivable - affiliates 5,679 13,871
Inventory 55,463 13,000
Prepaid expenses and other 37,684 46,864
------------ ------------
Total current assets 579,987 607,316
------------ ------------
INVESTMENTS
Energy projects 1,210,409 1,163,597
Oil and gas 64,980 62,949
------------ ------------
Total investments 1,275,389 1,226,546
------------ ------------
PROPERTY, PLANT AND EQUIPMENT 4,921,468 3,125,747
Less accumulated depreciation and amortization 269,600 250,934
------------ ------------
Net property, plant and equipment 4,651,868 2,874,813
------------ ------------
OTHER ASSETS
Goodwill 297,230 308,051
Restricted cash and other 126,757 141,390
------------ ------------
Total other assets 423,987 449,441
------------ ------------
TOTAL ASSETS $6,931,231 $5,158,116
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
------------- ---------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable - affiliates $ 13,595 $ 8,339
Accounts payable and accrued liabilities 126,182 99,062
Accrued incentive compensation 112,652 112,652
Interest payable 37,306 56,708
Short-term obligations 1,525,574 29,930
Current maturities of long-term obligations 198,570 194,586
---------- ----------
Total current liabilities 2,013,879 501,277
---------- ----------
LONG-TERM OBLIGATIONS NET OF CURRENT MATURITIES 2,575,715 2,366,430
---------- ----------
LONG-TERM DEFERRED LIABILITIES
Deferred taxes and tax credits 604,980 613,009
Deferred revenue 505,489 490,471
Other 92,137 79,369
---------- ----------
Total long-term deferred liabilities 1,202,606 1,182,849
---------- ----------
TOTAL LIABILITIES 5,792,200 4,050,556
---------- ----------
COMPANY - OBLIGATED MANDATORILY REDEEMABLE
SECURITY OF PARTNERSHIP HOLDING SOLELY PARENT
DEBENTURES 150,000 150,000
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDER'S EQUITY
Common stock, no par value; 10,000 shares
authorized; 100 shares issued and outstanding 64,130 64,130
Additional paid-in capital 629,406 629,406
Retained earnings 278,441 234,345
Accumulated other comprehensive income 17,054 29,679
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 989,031 957,560
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $6,931,231 $5,158,116
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 44,096 $ 37,700
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income from energy projects (60,745) (17,567)
Equity in income from oil and gas (3,642) (5,465)
Distributions from energy projects 28,888 37,264
Depreciation and amortization 24,146 22,782
Deferred taxes and tax credits 3,142 24,904
Cumulative effect on prior years of change in accounting
for start-up costs 13,840 --
(Increase) decrease in accounts receivable (11,947) 7,251
Decrease in prepaid expenses and other 10,297 2,958
Increase in accounts payable and accrued liabilities 34,455 15,390
Decrease in interest payable (19,402) (2,306)
Other, net (4,025) (19,548)
----------- -----------
Net cash provided by operating activities 59,103 103,363
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term obligations 234,878 20,133
Payments on long-term obligations (22,583) (22,832)
Short-term financing, net 1,496,522 -
----------- -----------
Net cash provided by (used in) financing activities 1,708,817 (2,699)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in energy projects (6,184) (227)
Loans to energy projects (14,815) (15,400)
Purchase of generating station (1,800,355) --
Purchase of common stock of acquired companies - (4,109)
Capital expenditures (27,512) (28,209)
Decrease in restricted cash 27,527 32,956
Other, net (12,787) (1,478)
----------- -----------
Net cash used in investing activities (1,834,126) (16,467)
----------- -----------
Effect of exchange rate changes on cash (5,853) 2,631
----------- -----------
Net increase (decrease) in cash and cash equivalents (72,059) 86,828
Cash and cash equivalents at beginning of period 459,178 585,883
----------- -----------
Cash and cash equivalents at end of period $ 387,119 $ 672,711
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1. GENERAL
All adjustments, including recurring accruals, have been made that are
necessary to present fairly the consolidated financial position and results of
operations for the periods covered by this report. The results of operations
for the three months ended March 31, 1999, are not necessarily indicative of the
operating results for the full year.
Edison Mission Energy's (EME) significant accounting policies are described in
Note 2 to EME's Consolidated Financial Statements as of December 31, 1998 and
1997, included in its 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 31, 1999. EME follows the same accounting
policies for interim reporting purposes. This quarterly report should be read
in connection with such financial statements.
Certain prior period amounts have been reclassified to conform to the current
period financial statement presentation.
NOTE 2. INVESTMENTS
The following table presents summarized financial information of the
investments in energy projects and oil and gas accounted for by the equity
method:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
ENERGY PROJECTS
Operating Revenues $442,844 $343,057
Income from Operations 172,246 59,931
Net Income 140,951 36,321
OIL AND GAS
Operating Revenues $ 43,167 $ 57,465
Income from Operations 8,172 15,688
Net Income 7,274 12,480
</TABLE>
6
<PAGE>
NOTE 3. ACQUISITION
In March 1999, EME Homer City Generation L.P. EME Homer City, an indirect,
wholly owned affiliate of EME, completed a transaction with GPU, Inc., New York
State Electric & Gas Corporation and their respective affiliates to acquire the
1,884-MW Homer City Electric Generating Station and certain facilities and other
assets associated therewith (collectively, Homer City).
Consideration for Homer City consisted of a cash payment of approximately $1.8
billion, which was partially financed by $1.5 billion of new loans (see Note 4).
Pursuant to the Asset Purchase Agreement, EME guarantees all obligations of EME
Homer City under the Asset Purchase Agreement.
The acquisition was accounted for utilizing the purchase method. EME's
consolidated statement of income for the three months ended March 31, 1999
reflects the operations of Homer City beginning on March 18, 1999.
NOTE 4. FINANCIAL INSTRUMENTS
In March 1999, Edison Mission Energy Holdings Co. (EME Holdings), parent
company of EME Homer City, closed a $1.1 billion financing and EME closed a $700
million financing. The EME Holdings financing consists of (1) an $800 million,
364-day interest only term loan, (2) a $250 million, five-year interest only
construction term loan and (3) a $50 million, five-year interest only revolving
loan. These loans are structured on a limited-recourse basis, in which the
lenders look primarily to the cash generated by EME Holdings and its
subsidiaries to repay the debt and have taken a security interest in the assets
of EME Holdings and its subsidiaries. The EME financing consists of a $700
million, 364-day interest only revolving credit facility, structured on a
recourse, unsecured basis. The proceeds of EME Holdings' $800 million loan and
EME's $700 million loan combined with cash and corporate revolver borrowings
totaling approximately $300 million, were used to finance the acquisition of
Homer City.
NOTE 5. COMMITMENTS AND CONTINGENCIES
FIRM COMMITMENTS FOR ASSET PURCHASES
<TABLE>
<CAPTION>
PROJECTS U.S. ($ IN MILLIONS)
- -------- --------------------
<S> <C>
Commonwealth Edison Co. (i) $ 5,000
Contact Energy Ltd. (Contact) (ii) 625
</TABLE>
(i) A wholly owned subsidiary of EME executed an Asset Sale Agreement to
purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
totaling 9,772 MW located in the midwestern United States. The closing of
the transaction is subject to receipt of various state and federal
regulatory approvals and is expected to be completed by year end 1999.
7
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(ii) A wholly owned subsidiary of EME executed a Sale and Purchase Agreement to
purchase 40% of Contact. Contact owns and operates hydroelectric,
geothermal and natural gas-fired power generating plants in New Zealand
with a total generating capacity of 2,371 MW. Contact also supplies gas
and electricity to customers in New Zealand and has minority interests in
two power projects in Australia. The acquisition is conditional on the New
Zealand government completing an initial public offering of the remaining
60% of Contact, planned for May 1999.
FIRM COMMITMENTS TO CONTRIBUTE PROJECT EQUITY
<TABLE>
<CAPTION>
PROJECTS LOCAL CURRENCY U.S. ($ IN MILLIONS)
- -------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira $ 136
Paiton (ii) 35
EcoElectrica (iii) 34
Tri Energy (iv) 25
Doga (v) 4
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
(ii) Paiton is a 1,230-MW coal-fired power plant under construction in East
Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest.
Equity contributions are currently being made and will continue until
commercial operation, which is currently scheduled for 1999.
(iii) EcoElectrica is a 540-MW liquefied natural gas combined-cycle cogeneration
facility under construction in Penuelas, Puerto Rico. A wholly owned
subsidiary of EME owns a 50% interest. Equity will be contributed at
commercial operation, which is currently scheduled for late 1999.
(iv) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
interest. Equity will be contributed at commercial operation, which is
currently scheduled for mid-2000.
(v) Doga is a 180-MW gas-fired power plant under construction near Istanbul,
Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity
contributions are currently being made and will continue until commercial
operation, which is currently scheduled for the second quarter of 1999.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
8
<PAGE>
CONTINGENT OBLIGATIONS TO CONTRIBUTE PROJECT EQUITY
<TABLE>
<CAPTION>
PROJECTS U.S. ($ IN MILLIONS)
- -------- --------------------
<S> <C>
Paiton (i) $141
Tri Energy (ii) 20
Doga (ii) 14
Contact (ii) 13
All Other 18
</TABLE>
(i) Contingent obligations to contribute additional project equity (Contingent
Equity) would be based on events principally related to capital cost
overruns during the plant construction, certain partner obligations or
events of default. These contingent obligations are to be cancelled (if
unused) as of the date of term financing by the Export-Import Bank of the
United States. Term financing by the Export-Import Bank of the United
States is the subject of a comprehensive set of conditions and is scheduled
to be achieved by October 1999. A dispute involving a slope adjacent to the
Paiton site will require Contingent Equity to be contributed for amounts
not otherwise covered by insurance. EME's share of the total costs related
to the slope failure are currently estimated to be between $16 and $44
million.
(ii) Contingent obligations to contribute additional equity to the project would
be based on events principally related to capital cost overruns during
plant construction, certain EME or partner obligations or events of
default.
Other than as noted above, management is not aware, at this time, of any other
contingent obligations or obligations to contribute project equity.
OTHER COMMITMENTS AND CONTINGENCIES
Certain of EME's subsidiaries entered into indemnification agreements whereby
the subsidiaries agreed to repay capacity payments to the projects' power
purchasers, in the event the projects unilaterally terminate their performance
or reduce their electric power producing capability during the term of the power
contract. Obligations under these indemnification agreements as of March 31,
1999, if payment were required, would be $252 million. Management has no reason
to believe that the projects will either terminate their performance or reduce
their electric power producing capability during the term of the power
contracts.
Paiton is a 1,230-MW coal-fired power plant under construction in East Java,
Indonesia. A wholly owned subsidiary of EME owns a 40% interest and has a $349
million investment at March 31, 1999. Construction on the two-unit Paiton
project is nearing completion. The tariff is higher in the early years and
steps down over time. The tariff for the Paiton project includes infrastructure
to be used in common by other units at the Paiton complex. The plant's output is
fully contracted with the state-owned electricity company, PT Perusahaan Listrik
Negara (PLN). Payments are in Indonesian Rupiah, with the portion of such
payments intended to cover non-Rupiah project costs (including
9
<PAGE>
returns to investors) indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the Power Purchase Agreement in February 1994. PLN's
payment obligations are supported by the Government of Indonesia. The projected
rate of growth of the Indonesian economy and the exchange rate of Indonesian
Rupiah into U.S. dollars have deteriorated significantly since the Paiton
project was contracted, approved and financed. The project received substantial
finance and insurance support from the Export-Import Bank of the United States,
The Export-Import Bank of Japan, the U.S. Overseas Private Investment
Corporation and the Ministry of International Trade and Industry of Japan. The
Paiton project's senior debt ratings have been reduced from investment grade to
speculative grade based on the rating agencies' perceived increased risk that
PLN might not be able to honor the electricity sales contract with Paiton. The
Government of Indonesia has arranged to reschedule sovereign debt owed to
foreign governments and has entered into discussions about rescheduling
sovereign debt owed to private lenders. PLN has announced its intentions to
commence discussions with independent power producers to renegotiate the power
supply contracts, however it is not yet known what form the renegotiation may
take. The initial meeting on these renegotiations is scheduled in May 1999. Any
material modifications of the contract could also require a renegotiation of the
Paiton project's debt agreement. The impact of any such renegotiations with PLN,
the Government of Indonesia or the project's creditors on EME's expected return
on its investment in Paiton is uncertain at this time, however, management
believes that it will ultimately recover its investment in the project.
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn,
New York. A wholly owned subsidiary of EME owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted
general monetary claims against the contractor. In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
EME's projected construction expenditures that will be funded utilizing non-
recourse project financing are $14 million at March 31, 1999.
LITIGATION
EME is routinely involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based on advice of counsel, does not believe that the
final outcome of any pending litigation will have a material adverse effect on
EME's financial position or results of operations.
10
<PAGE>
ENVIRONMENTAL MATTERS
EME is subject to environmental regulation by federal, state and local
authorities in the U.S. and foreign regulatory authorities with jurisdiction
over projects located outside the U.S. EME believes that it is in substantial
compliance with environmental regulatory requirements and that maintaining
compliance with current requirements will not materially affect its financial
position or results of operations.
EME completed a partial review of its sites in 1995 and does not believe
that a material liability exists as of March 31, 1999. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these increased operating expenses are not expected to have a material
impact on EME's financial position or results of operations.
NOTE 6. BUSINESS SEGMENTS
EME operates predominately in one line of business, electric power
generation, with reportable segments organized by geographic region: Americas,
Asia Pacific and Europe, Central Asia, Middle East and Africa. EME's plants are
located in different geographic areas, which mitigate the effects of regional
markets, economic downturns or unusual weather conditions. These regions take
advantage of the increasing globalization of the independent power market.
Electric power and steam generated domestically is sold primarily under
long-term contracts to electric utilities and industrial steam users located in
the U.S. Excluding the U.K. and a project in Australia, electric power generated
overseas is sold primarily under long-term contracts to electric utilities
located in the country where the power is generated. Projects located in the
U.K. and a project in Australia sell their energy and capacity production
through a centralized electricity pool. These projects enter into short- and/or
long-term contracts to hedge against the volatility of price fluctuations in the
pool. Intercompany transactions have been eliminated in the following segment
information.
<TABLE>
<CAPTION>
Europe,
(In thousands) Central Asia,
Three Months Ended Asia Middle East Corporate/
March 31, 1999 Americas Pacific and Africa Other/(i)/ Total
-------------- -------- --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Operating revenues $ 83.4 $ 51.0 $ 135.4 $ -- $ 269.8
Net income (loss) 31.2 (5.5) 22.7 (4.3) 44.1
Total assets 2,973.6 1,745.6 2,212.0 -- 6,931.2
March 31, 1998
--------------
Operating revenues $ 29.4 $ 54.1 $ 148.4 $ -- $ 231.9
Net income (loss) 10.2 5.2 27.6 (5.3) 37.7
Total assets 901.3 1,779.5 2,421.5 -- 5,102.3
</TABLE>
(i) Includes corporate net interest expense
11
<PAGE>
NOTE 7. SUBSEQUENT EVENTS
In April 1999, EME entered into agreements to acquire the Ferrybridge and
Fiddler's Ferry electric generating plants from the U.K.'s PowerGen for
approximately $2 billion. Each plant has a generating capacity of approximately
2,000 MW.
The purchase is subject to regulatory approval in accordance with U.K.
merger control legislation pursuant to an undertaking given by PowerGen to the
U.K. Government last year that allowed PowerGen to buy the East Midlands
Electricity Regional Electricity Company. EME plans to finance the acquisition
with a combination of debt secured by the project, corporate debt, cash and
funding from Edison International. The transaction is expected to close in the
second quarter of 1999.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q includes certain forward-looking
statements, the realization of which may be affected by certain important
factors discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" thereunder and elsewhere herein.
GENERAL
- -------
Edison Mission Energy (EME) is a leading global power producer. Through its
subsidiaries, EME is engaged in the business of developing, acquiring, owning
and operating electric power generation facilities worldwide. EME's current
investments include 53 projects totaling 12,399 megawatts (MW) of generation
capacity, of which 9,237 are in operation and 3,162 are under construction. In
addition, three operating projects totaling 16,280 MW of generating capacity are
pending acquisition.
EME's operating revenues are derived primarily from electric revenues and
equity in income from energy projects. Operating revenues also include equity
in income from oil and gas investments and revenue attributable to operation and
maintenance services.
Electric revenues are derived from consolidated results of operations of
one domestic and several international entities. Equity in income from energy
projects relates to EME's ownership interest of 50% or less voting stock in
projects. The equity method of accounting is generally used to account for the
operating results of entities over which EME has a significant influence but in
which it does not have a controlling interest. With respect to entities
accounted for under the equity method, EME recognizes its proportional share of
the income or loss of such entities.
ACQUISITION
- -----------
In March 1999, EME Homer City Generation L.P. (EME Homer City), an
indirect, wholly owned affiliate of EME, completed a transaction with GPU, Inc.,
New York State Electric & Gas Corporation and their respective affiliates to
acquire the 1,884-MW Homer City Electric Generating Station and certain
facilities and other assets associated therewith (collectively, Homer City).
Consideration for Homer City consisted of a cash payment of approximately
$1.8 billion. Pursuant to the Asset Purchase Agreement, EME guarantees all
obligations of EME Homer City under the Asset Purchase Agreement.
The acquisition was accounted for utilizing the purchase method. EME's
consolidated statement of income for the three months ended March 31, 1999
reflects the operations of Homer City beginning on March 18, 1999.
13
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
OPERATING REVENUES Operating revenues increased $37.9 million for the first
quarter of 1999, compared with the first quarter of 1998, resulting primarily
from an increase in equity in income from energy projects. Equity in income from
energy projects increased $43.2 million during the first quarter of 1999,
compared with the same prior year period. This increase was primarily the result
of higher revenues from several cogeneration projects due to a final settlement
on energy pricing for prior years and from one cogeneration project as the
result of a gain on termination of a power sales agreement.
OPERATING EXPENSES Operating expenses increased $23 million for the first
quarter of 1999, compared with the same prior year period. This increase was due
to higher fuel, plant operations and administrative and general expenses. The
increases in fuel expense and plant operations are primarily the result of the
acquisition of Homer City in March 1999. The administrative and general expense
increase was primarily related to increased project development/acquisition
costs.
OTHER INCOME (EXPENSE) Interest and other income decreased $6 million for the
first quarter of 1999, compared with the first quarter of 1998. The decrease
was primarily due to less interest earned on lower cash balances.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position (SOP) 98-
5, "Reporting on the Costs of Start-Up Activities", which became effective in
January 1999. The Statement requires that certain costs related to start-up
activities be expensed as incurred and that certain previously capitalized costs
be expensed and reported as a cumulative change in accounting principle. The
impact of adopting SOP 98-5 on EME's net income was $13.8 million, after-tax.
PROVISION FOR INCOME TAXES EME recorded an effective tax provision rate of 22%
for the three months ended March 31, 1999, compared with a 41% rate for the same
prior year period. The decrease in the 1999 effective tax rate was primarily
due to lower foreign income taxes that result from the permanent reinvestment of
earnings from foreign affiliates located in different foreign tax jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES For the three months ended March 31, 1999, net
cash provided by operating activities decreased to $59.1 million from $103.4
million for the same period in 1998. The 1999 decrease primarily reflects
higher income taxes, lower distributions from energy projects and higher working
capital requirements.
Net cash provided by financing activities totaled $1,708.8 million during
the first quarter of 1999, compared to net cash used in financing activities of
$2.7 million in 1998 for the same prior year period. The 1999 increase is
primarily due to the Edison Mission Energy Holding Co., parent company of EME
Homer City, borrowing of $800 million,
14
<PAGE>
EME financing of $700 million, and borrowing on the corporate revolver of $220
million, the proceeds of which were used to purchase Homer City.
Net cash used in investing activities increased to $1,834.1 million for the
three months ended March 31, 1999 from $16.5 million for the three months ended
March 31, 1998. The increase is primarily due to the purchase of Homer City.
At March 31, 1999, EME had cash and cash equivalents of $387.1 million and
had available $224 million of borrowing capacity under a $500 million revolving
credit facility that expires in 2001. This borrowing capacity under the
revolving credit facility may be reduced by borrowings for firm commitments to
contribute project equity and to fund capital expenditures and construction
costs of its project facilities.
FIRM COMMITMENTS FOR ASSET PURCHASES
<TABLE>
<CAPTION>
PROJECTS U.S. ($ IN MILLIONS)
- -------- --------------------
<S> <C>
Commonwealth Edison Co. (i) $ 5,000
Contact Energy Ltd. (Contact) (ii) 625
</TABLE>
(i) A wholly owned subsidiary of EME executed an Asset Sale Agreement to
purchase the fossil-fuel generating assets of Commonwealth Edison Co.,
totaling 9,772 MW located in the midwestern United States. The closing of
the transaction is subject to receipt of various state and federal
regulatory approvals and is expected to be completed by year end 1999.
(ii) A wholly owned subsidiary of EME executed a Sale and Purchase Agreement to
purchase 40% of Contact. Contact owns and operates hydroelectric,
geothermal and natural gas-fired power generating plants in New Zealand
with a total generating capacity of 2,371 MW. Contact also supplies gas
and electricity to customers in New Zealand and has minority interests in
two power projects in Australia. The acquisition is conditional on the New
Zealand government completing an initial public offering of the remaining
60% of Contact, planned for May 1999.
FIRM COMMITMENTS TO CONTRIBUTE PROJECT EQUITY
<TABLE>
<CAPTION>
PROJECTS LOCAL CURRENCY U.S. ($ IN MILLIONS)
- -------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira $136
Paiton (ii) 35
EcoElectrica (iii) 34
Tri Energy (iv) 25
Doga (v) 4
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
15
<PAGE>
(ii) Paiton is a 1,230-MW coal-fired power plant under construction in East
Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest.
Equity contributions are currently being made and will continue until
commercial operation, which is currently scheduled for 1999.
(iii) EcoElectrica is a 540-MW liquefied natural gas combined-cycle cogeneration
facility under construction in Penuelas, Puerto Rico. A wholly owned
subsidiary of EME owns a 50% interest. Equity will be contributed at
commercial operation, which is currently scheduled for late 1999.
(iv) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
interest. Equity will be contributed at commercial operation, which is
currently scheduled for mid-2000.
(v) Doga is a 180-MW gas-fired power plant under construction near Istanbul,
Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity
contributions are currently being made and will continue until commercial
operation, which is currently scheduled for the second quarter of 1999.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
CONTINGENT OBLIGATIONS TO CONTRIBUTE PROJECT EQUITY
<TABLE>
<CAPTION>
PROJECTS U.S. ($ IN MILLIONS)
- -------- --------------------
<S> <C>
Paiton (i) $141
Tri Energy (ii) 20
Doga (ii) 14
Contact (ii) 13
All Other 18
</TABLE>
(i) Contingent obligations to contribute additional project equity (Contingent
Equity) would be based on events principally related to capital cost
overruns during the plant construction, certain partner obligations or
events of default. These contingent obligations are to be cancelled (if
unused) as of the date of term financing by the Export-Import Bank of the
United States. Term financing by the Export-Import Bank of the United
States is the subject of a comprehensive set of conditions and is
scheduled to be achieved by October 1999. A dispute involving a slope
adjacent to the Paiton site will require Contingent Equity to be
contributed for amounts not otherwise covered by insurance. EME's share of
the total costs related to the slope failure are currently estimated to be
between $16 and $44 million.
16
<PAGE>
(ii) Contingent obligations to contribute additional equity to the project would
be based on events principally related to capital cost overruns during
plant construction, certain EME or partner obligations or events of
default.
Other than as noted above, management is not aware, at this time, of any
other contingent obligations or obligations to contribute project equity.
OTHER COMMITMENTS AND CONTINGENCIES
Certain of EME's subsidiaries entered into indemnification agreements
whereby the subsidiaries agreed to repay capacity payments to the projects'
power purchasers, in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contract. Obligations under these indemnification agreements as of
March 31, 1999, if payment were required, would be $252 million. Management has
no reason to believe that the projects will either terminate their performance
or reduce their electric power producing capability during the term of the power
contracts.
Paiton is a 1,230-MW coal-fired power plant under construction in East
Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest and has a
$349 million investment at March 31, 1999. Construction on the two-unit Paiton
project is nearing completion. The tariff is higher in the early years and steps
down over time. The tariff for the Paiton project includes infrastructure to be
used in common by other units at the Paiton complex. The plant's output is fully
contracted with the state-owned electricity company, PT Perusahaan Listrik
Negara (PLN). Payments are in Indonesian Rupiah, with the portion of such
payments intended to cover non-Rupiah project costs (including returns to
investors) indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the Power Purchase Agreement in February 1994. PLN's
payment obligations are supported by the Government of Indonesia. The projected
rate of growth of the Indonesian economy and the exchange rate of Indonesian
Rupiah into U.S. dollars have deteriorated significantly since the Paiton
project was contracted, approved and financed. The project received substantial
finance and insurance support from the Export-Import Bank of the United States,
The Export-Import Bank of Japan, the U.S. Overseas Private Investment
Corporation and the Ministry of International Trade and Industry of Japan. The
Paiton project's senior debt ratings have been reduced from investment grade to
speculative grade based on the rating agencies' perceived increased risk that
PLN might not be able to honor the electricity sales contract with Paiton. The
Government of Indonesia has arranged to reschedule sovereign debt owed to
foreign governments and has entered into discussions about rescheduling
sovereign debt owed to private lenders. PLN has announced its intentions to
commence discussions with independent power producers to renegotiate the power
supply contracts, however it is not yet known what form the renegotiation may
take. The initial meeting on these renegotiations is scheduled in May 1999. Any
material modifications of the contract could also require a renegotiation of the
Paiton project's debt agreement. The impact of any such renegotiations with PLN,
the Government of Indonesia or the project's creditors
17
<PAGE>
on EME's expected return on its investment in Paiton is uncertain at this time,
however, management believes that it will ultimately recover its investment in
the project.
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in
Brooklyn, New York. A wholly owned subsidiary of EME owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted general
monetary claims against the contractor. In connection with a $407 million non-
recourse project refinancing in 1997, EME agreed to indemnify BNY and its
partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
EME's projected construction expenditures that will be funded utilizing
non-recourse project financing are $14 million at March 31, 1999.
EME and its subsidiaries may incur additional obligations to make equity
and other contributions to projects in the future. EME believes that it will
have sufficient liquidity on both a short- and long-term basis to fund pre-
financing project development costs, make equity contributions to partnerships,
pay corporate debt obligations and pay other administrative and general expenses
as they are incurred from (1) distributions from energy projects and dividends
from investments in oil and gas, (2) proceeds from the repayment of loans to
energy projects and (3) funds available from EME's revolving credit facility.
CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY POOL PRICING, FOREIGN CURRENCY
FLUCTUATIONS AND OTHER CONTRACTUAL OBLIGATIONS Changes in interest rates,
changes in electricity pool pricing and fluctuations in foreign currency
exchange rates can have a significant impact on EME's results of operations.
Interest rate changes affect the cost of capital needed to construct and finance
projects. EME has mitigated the risk of interest rate fluctuations by arranging
for fixed rate financing or variable rate financing with interest rate swaps or
other hedging mechanisms for the majority of its project financing. Interest
expense included $6.2 million and $6.1 million for the three months ended March
31, 1999, and 1998, respectively, as a result of interest rate swap and collar
agreements. EME has entered into several interest rate swap and collar
agreements whereby the maturity date of the swaps and collars occurs prior to
the final maturity of the underlying debt. EME does not believe that interest
rate fluctuations will have a material adverse effect on its financial position
or results of operations.
Projects in the U.K. sell their electrical energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing price
(also referred to as the "pool price") for electrical energy. The pool price is
extremely volatile and can vary by as much as a factor of ten or more over the
course of a few hours, due to the large differentials in demand according to the
time of day. First Hydro mitigates a portion of the market risk of the pool by
entering into contracts for differences (electricity rate swap
18
<PAGE>
agreements), related to either the selling or purchasing price of power, whereby
a contract specifies a price at which the electricity will be traded, and the
parties to the agreement make payments, calculated based on the difference
between the price in the contract and the pool price for the element of power
under contract. These contracts are sold in various structures. These contracts
act as a means of stabilizing production revenues or purchasing costs by
removing an element of First Hydro's net exposure to pool price volatility. On
July 29, 1998, the Director General of Electricity Supply proposed to the
Minister for Science, Energy and Industry that the current structure of
contracts-for-differences and compulsory trading via the pool at half-hourly
clearing prices bid a day ahead be abolished. He proposed in its place, among
other things, the establishment of voluntary forwards and futures markets,
organized by independent market operators and evolving in response to demand; a
short-term bilateral market operating from 24 to 4-hours before a trading
period; a balancing market to enable the system operator to balance generation
and demand and resolve any transmission constraints; a settlement process for
recovering imbalances between contracted and metered volumes with stronger
incentives for being in balance; and a Balancing and Settlement Code Panel to
oversee governance of the short-term bilateral and balancing markets. The
Minister for Science, Energy and Industry has recommended that the proposal be
implemented by April 2000. Further definition of the proposal will be required
before the effects of the changes can be evaluated. Implementation of the
proposal may also require legislation.
Loy Yang B sells its electrical energy through a centralized electricity
pool (the National Electricity Market) which provides for a system of generator
bidding, central dispatch and a settlements system based on a clearing market
for each half-hour of every day. The Victorian Power Exchange, operator and
administrator of the pool, determines a system marginal price each half-hour. To
mitigate exposure to price volatility of the electricity traded into the pool,
Loy Yang B has entered into a number of financial hedges. From May 8, 1997 to
December 31, 2000, approximately 53% to 64% of the plant output sold is hedged
under "Vesting Contracts" with the remainder of the plant capacity hedged under
the "State Hedge" described below. Vesting Contracts were put into place by the
State Government of Victoria, Australia (State), between each generator and each
distributor, prior to the privatization of electric power distributors in order
to provide more predictable pricing for those electricity customers that were
unable to choose their electricity retailer. Vesting Contracts set base strike
prices at which the electricity will be traded, and the parties to the agreement
make payments, calculated based on the difference between the price in the
contract and the half-hourly pool clearing price for the element of power under
contract. These contracts are sold in various structures. These contracts are
accounted for as electricity rate swap agreements. The State Hedge is a long-
term contractual arrangement based upon a fixed price commencing May 8, 1997,
and terminating October 31, 2016. The State guarantees SECV's obligations under
the State Hedge.
EME's electric revenues were increased by $23.3 million and $50.7 million
for the three-month period ended March 31, 1999, and 1998, respectively, as a
result of electricity rate swap agreements.
19
<PAGE>
Electric power generated at Homer City is sold under bilateral arrangements
with domestic utilities and power marketers under short-term contracts (two
years or less) or to the Pennsylvania-New Jersey-Maryland Power Pool (PJM) or
the New York Power Pool (NYPP). These pools have short-term markets, which
establish an hourly clearing price. Homer City is situated in the PJM Control
Area and is physically connected to high-voltage transmission lines serving both
the PJM and NYPP markets. Power can also be transmitted to the midwestern United
States. EME has developed risk management policies and procedures which, among
other matters, address credit risk. It is EME's policy to sell to investment
grade counterparties. EME intends on hedging a portion of the electric output of
the plant in order to lock in desirable outcomes. It plans to manage the "spark
spread" or margin, that is the spread between electric prices and fuel prices
when deemed appropriate. It plans to use forward contracts, swaps, futures, or
options contracts to achieve those objectives.
The electric power generated by EME's domestic operating projects,
excluding Homer City, is generally sold to electric utilities pursuant to long-
term (typically, 15 to 30-year) power sales contracts and is expected to result
in consistent cash flow under a wide range of economic and operating
circumstances. To accomplish this, EME structured its power sales contracts so
that fluctuations in fuel costs would produce similar fluctuations in electric
and/or steam revenues and entered into long-term fuel supply and transportation
agreements.
Fluctuations in foreign currency exchange rates can affect, on a U.S.
dollar equivalent basis, the amount of EME's equity contributions to, and
distributions from, its foreign projects. As EME continues to expand into
foreign markets, fluctuations in foreign currency exchange rates can be expected
to have a greater impact on EME's results of operations in the future. At times,
EME has hedged a portion of its current exposure to fluctuations in foreign
exchange rates where it deems appropriate through financial derivatives,
offsetting obligations denominated in foreign currencies and indexing underlying
project agreements to U.S. dollars or other indices reasonably expected to
correlate with foreign exchange movements. In addition, EME has used statistical
forecasting techniques to help assess foreign exchange risk and the
probabilities of various outcomes. There can be no assurance, however, that
fluctuations in exchange rates will be fully offset by hedges or that currency
movements and the relationship between certain macro economic variables will
behave in a manner consistent with historical or forecasted relationships.
ENVIRONMENTAL MATTERS EME is subject to environmental regulation by federal,
state and local authorities in the U.S. and foreign regulatory authorities with
jurisdiction over projects located outside the U.S. EME believes that it is in
substantial compliance with environmental regulatory requirements and that
maintaining compliance with current requirements will not materially affect its
financial position or results of operations.
EME completed a partial review of its sites in 1995 and does not believe
that a material liability exists as of March 31, 1999. The implementation of
Clean Air Act
20
<PAGE>
Amendments is expected to result in increased operating expenses; however, these
increased operating expenses are not expected to have a material impact on EME's
financial position or results of operations.
YEAR 2000 ISSUE EME has a comprehensive program in place to remediate
potential Year 2000 impacts from critical systems. EME divides its Year 2000
Issue activities into five phases: inventory, impact assessment, remediation,
documentation and certification. EME's plan is for critical systems to be
complete by July 1999. A critical system is defined as those applications and
systems, including embedded processor technology, which if not appropriately
remediated may have a significant impact on customers, the revenue stream,
regulatory compliance, or the health and safety of personnel. EME has
essentially completed all phases of the project and is going through the final
review and approval process, well ahead of the July date.
Assurances from third party operated plants have been received indicating
aggressive Year 2000 remediation programs. Monitoring of these efforts is
ongoing. Plants under construction have obtained assurances from new
construction and development contractors, who have been requested to ensure this
is part of their goals. General warranty of plants would likely include any
equipment issues that may arise regarding Year 2000 in the current year.
The other essential component of the EME Year 2000 readiness program is to
identify and assess vendor products and business partners for Year 2000
readiness. EME has a process in place to identify and contact vendors and
business partners to determine their Year 2000 status, and is evaluating the
responses. EME's general policy requires that all newly purchased products be
Year 2000 ready or otherwise designed to allow EME to determine whether such
products present Year 2000 issues.
Plant contingency plans have been developed and reviewed for any
significant issues and to schedule appropriate testing and/or training. Such
contingency plans include developing strategies for dealing with Year 2000-
related processing failures or malfunctions due to EME's internal systems or
from external parties. EME's contingency plans evaluate reasonably likely worst
case scenarios or conditions. EME does not expect the Year 2000 issue to have a
material adverse effect on its results of operations or financial position.
However, if not effectively remediated, negative effects from Year 2000 issues,
including those related to external systems, vendors, business partners, the
independent system operator, the power exchange or customers, could cause
results to differ.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
will be effective in January 2000. The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The Statement requires that changes in the derivative's fair value be recognized
currently in
21
<PAGE>
earnings unless specific hedge accounting criteria are met. A derivative's gains
and losses for qualifying hedges offset related results on the hedged item in
the income statement and a company must formally document, designate and assess
the effectiveness of transactions that receive hedge accounting. The impact of
adopting Statement 133 on EME's financial statements has not been quantified at
this time.
ACQUISITIONS PENDING In March 1999, EME entered into agreements to acquire the
fossil-fuel generating assets of Commonwealth Edison Co. (ComEd), totaling 9,772
MW. EME will operate the plants, which are located in the midwestern United
States. The closing of the transaction is subject to various state and federal
regulatory approvals and is expected to be completed by year end 1999. EME
plans to finance the approximately $5 billion acquisition with a combination of
debt secured by the project, corporate debt, cash and funding from Edison
International. The acquisition is expected to have an immaterial effect on
earnings in 1999, 2000 and 2001 as a result of transition contracts whereby
ComEd will retain power purchase agreements with EME, enabling ComEd access to
certain amounts of plant output for the next five years to serve its customers.
In March 1999, EME entered into agreements to acquire 40% of Contact,
currently owned by the government of New Zealand. Contact owns and operates
hydroelectric, geothermal and natural gas-fired power generating plants in New
Zealand with a total generating capacity of 2,371 MW. Contact also supplies gas
and electricity to customers in New Zealand and has minority interests in two
power projects in Australia. The acquisition is conditional on the New Zealand
government completing an initial public offering of the remaining 60% of
Contact, planned for May 1999. EME plans to finance the approximately $625
million acquisition with debt secured by the project, corporate debt, cash and
funding from Edison International. The acquisition is expected to have an
immaterial effect on earnings through 2001.
In April 1999, EME entered into agreements to acquire the Ferrybridge and
Fiddler's Ferry electric generating plants from the U.K.'s PowerGen for
approximately $2 billion. Each plant has a generating capacity of approximately
2,000 MW. The purchase is subject to regulatory approval in accordance with
U.K. merger control legislation pursuant to an undertaking given by PowerGen to
the U.K. Government last year that allowed PowerGen to buy the East Midlands
Electricity Regional Electricity Company. EME plans to finance the acquisition
with a combination of debt secured by the project, corporate debt, cash and
funding from Edison International. The transaction is expected to close in the
second quarter of 1999. The acquisition is expected to contribute to earnings
immediately after closing.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OTHER EVENTS In April 1999, EME entered into agreements to acquire the
Ferrybridge and Fiddler's Ferry electric generating plants from the United
Kingdom's PowerGen for approximately $2 billion. Each plant has a generating
capacity of approximately 2,000 MW.
The purchase is subject to regulatory approval in accordance with U.K.
merger control legislation pursuant to an undertaking given by PowerGen to the
U.K. Government last year that allowed PowerGen to buy the East Midlands
Electricity Regional Electricity Company. EME plans to finance the acquisition
with a combination of debt secured by the project, corporate debt, cash and
funding from Edison International. The transaction is expected to close in the
second quarter of 1999. The acquisition is expected to contribute to earnings
immediately after closing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
2.6 Agreement for the Sale and Purchase of Shares in Contract
Energy Limited between Her Majesty the Queen in Right of New
Zealand, Edison Mission Energy Taupo Limited and Edison
Mission Energy
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
The registrant filed the following reports on Form 8-K during the quarter
ended March 31, 1999.
Date of Report Date Filed Item Reported
-------------- ---------- -------------
March 18, 1999 April 2, 1999 2
23
<PAGE>
SIGNATURES
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.
EDISON MISSION ENERGY
-----------------------------
(Registrant)
Date: May 12, 1999 /s/ THOMAS E. LEGRO
- ------------------ -----------------------------
THOMAS E. LEGRO,
Vice President and
Controller
24
<PAGE>
EXHIBIT 2.6
HER MAJESTY THE QUEEN IN RIGHT OF NEW ZEALAND
as Vendor
- and -
EDISON MISSION ENERGY TAUPO LIMITED
as Purchaser
- and -
EDISON MISSION ENERGY
as Guarantor
- --------------------------------------------------------------------------------
AGREEMENT FOR THE SALE AND PURCHASE
OF SHARES IN CONTACT ENERGY LIMITED
- --------------------------------------------------------------------------------
[LOGO OF SIMPSON GRIERSON APPEARS HERE]
<PAGE>
CONTENTS
Clause Heading
l. Interpretation
2. Sale of the Shares
3. Purchase Price
4 Purchaser's Obligations
5. Settlement and Payment of the Purchase Price
6. Conditions of Settlement
7. Warranties
8. Pending Settlement
9. Restrictions
10. Purchaser's Covenants
11. No Greater Rights
12 Guarantee and Indemnity
13. Expenses
14. Delay in Exercise of Rights
15. Further Assurances and Post Settlement
16. Amendments
17. Assignment
18. Notices
19. Counterparts
20. Governing Law
21. Process Agent
SCHEDULE
l. Registered Holders
2. Form of Letter of Credit
3. Form of Indemnity
4. Bidding Rules
5. Capital Expenditure Details
6. Purchaser and Guarantor Details
<PAGE>
THIS AGREEMENT is dated 1999
BETWEEN:
(1) HER MAJESTY THE QUEEN IN RIGHT OF NEW ZEALAND acting by and through
her MINISTER OF FINANCE and her MINISTER RESPONSIBLE FOR CONTACT
ENERGY LIMITED (the "Vendor" or the "Crown"); and
(2) THE PURCHASER SPECIFIED IN SCHEDULE 6 (the "Purchaser");
(3) THE GUARANTOR SPECIFIED IN SCHEDULE 6 (the "Guarantor").
RECITALS:
A. Contact Energy Limited (the "COMPANY") is a company registered under
the Companies Act 1993 and has an issued share capital of 603,950,000
ordinary shares each ranking pari passu in all respects (such shares
representing the consolidated number of shares after a two for one
consolidation occurring on or about 10 March 1999).
B. The Vendor is the beneficial owner of all of the issued shares in the
Company, which are registered in the names of certain persons as set
out in Schedule l.
C. The Vendor is willing to sell 241,580,000 of the shares in the Company,
being 40.0% of the issued shares in the Company, and being the shares
expressed to be subject to this Agreement in Schedule 1 (the "SHARES"),
and the Purchaser is willing to purchase the Shares, in accordance with
the provisions of this Agreement.
D. The Vendor intends to sell the remaining 362,370,000 shares in the
Company by means of an initial public offering of the shares involving
a combined global offering to members of the public and institutional
and professional investors in New Zealand and to institutional and
professional investors in Australia (the "AUSTRALASIAN OFFERING") and
to institutional and professional investors in the United States and
other countries (the "INTERNATIONAL OFFERING").
E. It is intended that the International Offering will be fully
underwritten on a basis which is consistent with usual practice in
international financial markets pursuant to a purchase agreement
("PURCHASE AGREEMENT"). The Purchase Agreement is intended to be
conditional on settlement of the sale of the Shares pursuant to this
Agreement. Settlement of the sale of the Shares pursuant to this
Agreement is intended to occur contemporaneously with settlement under
the Purchase Agreement.
<PAGE>
-2-
F. The Purchaser and the Guarantor acknowledge that:
(a) the Vendor has incurred, and will incur, significant costs in
relation to the Contact IPO;
(b) those costs have been incurred in reliance on the Shares being
sold contemporaneously with the sale of the shares the subject of
the Contact IPO; and
(c) failure by the Purchaser and Guarantor to satisfy their
obligations under this Agreement may result in settlement under
the Contact IPO being delayed or cancelled resulting in loss to
the Vendor.
G. The Guarantor is willing to guarantee the performance by the Purchaser
of its obligations under this Agreement.
IT IS AGREED:
1. INTERPRETATION
1.1 Definitions: In this Agreement (including in the Recitals), unless the
context otherwise requires:
"ACCEPTABLE BANK" means an internationally recognised bank with a
credit rating for long term debt of AA- or better, as issued by
Standard & Poor's (or a comparable credit rating issued by another
internationally recognised rating agency);
"AGREEMENT" means this Agreement, together with the Schedules;
"AUSTRALASIAN OFFERING" is defined in Recital D;
"BASE RATE" means for any period:
(a) the mid or "FRA" "settlement" rate for bank accepted bills of
exchange having a tenor equivalent to the term of the relevant
period as quoted on the Reuters page BKBM (or any successor page)
at or about 10:45 a.m. on the date on which such rate is to be
determined (expressed as a percentage); or
(b) if such rate is not available then such rate reasonably determined
by a bank, nominated for that purpose by the Governor of the
Reserve Bank of New Zealand, to be the nearest practicable
equivalent;
"BID BOND" means the bid bond in the amount of $25 million issued by
an Acceptable Bank in favour of the Vendor in connection with the
Purchaser's bid, as required by section 3 of the Bidding Rules;
<PAGE>
-3-
"BIDDING RULES" means the bidding rules dated January 1999 issued by
the Vendor relating to the sale of the Shares by international tender
as the same may have been amended from time to time, the operative
version of which as at the Final Bid Date is attached as Schedule 4;
"BUSINESS" means the businesses carried on by the Group as at the
Final Bid Date;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
registered banks (within the meaning of the Reserve Bank of New
Zealand Act 1989) are open for the transaction of normal banking
business in Wellington;
"COMPANY" is defined in Recital A;
"CONDITION DATE" means 29 October 1999;
"CONFIDENTIAL INFORMATION" is defined in clause 9.3;
"CONTACT IPO" means the intended initial public offering of up to
362,370,000 shares in the Company to be effected by means of the
Australasian Offering and the International Offering;
"DEFAULT INTEREST" is defined in clause 5.5;
"DOLLARS" and the sign "$" means New Zealand dollars;
"ECNZ" means Electricity Corporation of New Zealand Limited;
"ENCUMBRANCE" or "ENCUMBRANCE" includes a debenture, mortgage, charge
(whether fixed or floating), pledge, lien, hypothecation, title
retention, equity, deferred purchase, option and any other security
interest or third party right whether legal or equitable (and
references to "ENCUMBER" are to be construed accordingly);
"EXECUTION DATE" means the date of execution of this Agreement by the
Crown, being a date no later than 21 days after the Final Bid Date;
"FINAL BID DATE" means the final date for delivery of final bids under
the Bidding Rules, as set out in clause 3.5 of the Bidding Rules and
as amended, if at all, by the Vendor in accordance with the Bidding
Rules;
"GOVERNMENT DOCUMENTS" means any New Zealand Government cabinet papers
or ministerial papers;
"GROUP" means the Company and the Subsidiaries;
"INTERNATIONAL OFFERING" is defined in Recital D;
"LETTER OF CREDIT" means the irrevocable standby letter or letters of
credit, as required by section 3 of the Bidding Rules, in favour of
the Vendor issued by an
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Acceptable Bank or Acceptable Banks for, in aggregate, the full amount
of the Purchase Price and otherwise in the form set out in Schedule 2,
or in such other form as agreed by the Vendor in writing;
"OFFERING DOCUMENTS" means the documents that are, or are intended to
be, made available to potential investors in the Company in relation
to the Contact IPO, whether in New Zealand or elsewhere;
"ORDERS IN COUNCIL" means the Order or Orders in Council which bring
into force sections 3(1) and 3(7) of the State-Owned Enterprises
(Contact Energy Limited) Amendment Act 1998;
"PURCHASE AGREEMENT" is defined in Recital E;
"PURCHASE PRICE" means the sum specified in Schedule 6;
"RELATED BODY CORPORATE" bears the same meaning as in the Securities
Amendment Act 1988;
"SCHEDULE" means a schedule to this Agreement;
"SETTLEMENT" means the performance by the parties of their respective
obligations under clauses 5.2 and 5.4;
"SETTLEMENT DATE" means the date by and upon which the condition in.
clause 6.1 is satisfied or waived (which date is intended to be the
same as the date of settlement and completion under the Purchase
Agreement), or such later date as the Vendor and the Purchaser agree
in writing;
"SHARES" is defined in Recital C;
"SHAREHOLDING MINISTERS" means the Minister of Finance and the
Minister Responsible for Contact Energy Limited;
"STANDSTILL DEED" means the deed titled "Standstill Deed" entered into
by the Purchaser and the Guarantor and in favour of the Vendor, the
Company, the New Zealand Stock Exchange and each member of the
Syndicate;
"SUBSIDIARIES" means Contact United Energy Limited, Javelin Limited,
Hawkes Bay Power Limited, Contact Australia Pty Limited and their
respective subsidiaries (if any);
"SYNDICATE" means ABN AMRO Rothschild (the equity capital markets
joint venture of the Rothschild and ABN AMRO groups of companies), NM
Rothschild & Sons Limited, Rothschild Australia Securities Limited,
ABN AMRO Bank NV, ABN AMRO Corporate Finance Australia Limited, and
every Related Body Corporate of any such company, and every other
person identified in any of the
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Offering Documents as a manager and/or co-lead manager of the
International Offering and/or the Australasian Offering;
"VERIFICATION CERTIFICATE" means the certificate as defined in the
Bidding Rules; and
"WARRANTY" means a warranty in terms of clause 7.
1.2 PARTIES: In this Agreement, a reference to any party is to a party to
this Agreement and includes, as far as is consistent with the
provisions of this Agreement, that party's successors in title and
permitted assigns.
1.3 STATUTES: In this Agreement, any reference to a statute or statutory
provision, or order or regulation made under it, includes:
(a) that statute, provision, order or regulation, as amended, modified,
re-enacted or replaced from time to time (whether before or after
the Execution Date); and
(b) any previous statute, statutory provision, order or regulation
amended, modified, re-enacted or replaced by that statute,
provision, order or regulation.
1.4 GENERAL REFERENCES: In this Agreement, any reference to:
(a) a "PERSON" includes an individual, body corporate, an association
of persons (whether corporate or not), a trust, estate and agency
of a state (in each case, whether or not having separate legal
personality and whether incorporated or existing in New Zealand or
elsewhere);
(b) a "SUBSIDIARY" is to a subsidiary as defined in the Companies Act
1993 or the Corporations Law (Australia);
(c) one gender includes each other gender;
(d) the singular includes the plural and vice versa;
(e) an agreement includes that agreement as modified, supplemented,
novated or substituted from time to time; and
(f) time is to New Zealand standard time.
1.5 HEADINGS: Headings and the table of contents are to be ignored in
construing this Agreement.
1.6 JOINT AND SEVERAL - PURCHASER: Where two or more persons are named as
"the Purchaser" the expression "the Purchaser" shall be a reference to
each of the said persons severally as well as any two or greater number
of them jointly, and the
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obligations and agreements of the Purchaser in this Agreement shall
bind each of them and every two or greater number of them jointly and
each of them severally provided however that the delivery by or on
behalf of the Vendor of any notice, document or information to any one
or more of them shall be deemed to be delivery to all of them.
1.7 JOINT AND SEVERAL - GUARANTOR: Where two or more persons are named as
"the Guarantor" the expression "the Guarantor" shall be a reference to
each of the said persons severally as well as any two or greater
number of them jointly, and the obligations and agreements of the
Guarantor in this Agreement shall bind each of them and every two or
greater number of them jointly and each of them severally provided
however that the delivery by or on behalf of the Vendor of any notice,
document or information to any one or more of them shall be deemed to
be delivery to all of them.
2. SALE OF THE SHARES
2.1 AGREEMENT TO SELL: The Vendor will sell, as beneficial owner, and the
Purchaser will purchase, the Shares on and with effect from the
Settlement Date.
2.2 CONDITION OF THE SHARES: The Shares will, on transfer to the
Purchaser, be free from Encumbrances and have the benefit of all
rights attaching to them including the right to receive all dividends
declared or paid, or distributions (as that term is defined in the
Companies Act 1993) made, on the Shares after the Settlement Date.
3. PURCHASE PRICE
3.1 PURCHASE PRICE: The Purchaser shall pay the Purchase Price to the
Vendor before 2:00 p.m. on the Settlement Date. Until the whole of the
Purchase Price is finally received by the Vendor no right, title or
interest in the Shares shall pass to the Purchaser.
3.2 PAYMENTS: All payments to be made by a party under this Agreement will
be made free of any deduction, withholding, set-off, counterclaim,
restriction or condition.
3.3 CORE ACQUISITION PRICE: The Purchase Price does not include any
capitalised interest. In addition, the parties agree that the "lowest
price" for the purposes of the definition of "core acquisition price"
in section OB 1 of the Income Tax Act 1994 is equal to the Purchase
Price.
4. PURCHASER'S OBLIGATIONS
4.1 LETTER OF CREDIT: Within seven days following the Execution Date the
Purchaser will establish, or will procure the establishment of, the
Letter of Credit and deliver the same to the Vendor. Upon receipt of
the Letter of Credit, the Vendor will return
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the Bid Bond to the Purchaser, (subject to compliance by the Purchaser
with all obligations secured thereby), undrawn and uncalled, and shall
advise the provider of the Bid Bond in writing that the Bid Bond is no
longer required by it. The Letter of Credit may be drawn upon by the
Vendor in or towards satisfaction of payment of the Purchase Price if
the Vendor fails to pay the Purchase Price or any portion of it in
accordance with clause 3.
4.2 REMEDIES OF THE VENDOR ON DEFAULT: If the Purchaser fails to comply
with clause 4.1 in any respect then, without prejudice to any other
rights or remedies available to the Vendor at law or in equity,
including making demand under the Bid Bond, the Vendor may cancel this
Agreement by notice to the Purchaser and sue the Purchaser for
damages. Where the Vendor is entitled to cancel this Agreement, the
entry by the Vendor into a conditional or unconditional contract for
the sale of the Shares by the Vendor will take effect as a
cancellation of this Agreement by the Vendor if this Agreement has not
previously been cancelled and such resale will be deemed to have
occurred after cancellation. The damages claimable by the Vendor under
this clause 4.2 will include the damages specified in clause 5.7.
5. SETTLEMENT AND PAYMENT OF THE PURCHASE PRICE
5.1 TIME AND PLACE: Settlement will take place before 2:00 p.m. on the
Settlement Date at the offices of Simpson Grierson at Unisys House,
44-52 The Terrace, Wellington, New Zealand or at such other time or
place as the Vendor and the Purchaser may agree.
5.2 DOCUMENTS FOR DELIVERY BY VENDOR ON SETTLEMENT: On Settlement, and
against compliance with clause 5.4, the Vendor will deliver to the
Purchaser:
(a) registrable transfers of the Shares, executed by the Shareholding
Ministers, in favour of the Purchaser, together with the relevant
share certificates (if any) or a certificate from an authorised
officer of the Company certifying that no share certificates have
been issued;
(b) evidence that the Purchaser's name has been entered on the
Company's share register as the holder of the Shares; and
(c) a certified copy of each of the resolutions referred to in
clause 5.3.
5.3 RESOLUTIONS: Prior to Settlement, the Vendor will procure the passing
of the necessary resolutions of the shareholders or directors of the
Company sanctioning the registration of the transfers of the Shares
and appointing three Purchaser's nominees as directors to the board of
the Company (notified to the Vendor just prior to Settlement) with
effect from Settlement.
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5.4 REQUIREMENTS OF PURCHASER ON SETTLEMENT: On Settlement, the Purchaser
will make or procure payment of the Purchase Price in accordance with
clause 3.
5.5 DEFAULT INTEREST:
(a) If the Purchaser does not pay, or the Vendor does not receive,
under the Letter of Credit or otherwise, any sum payable under or
in terms of this Agreement as and when due the Purchaser will, on
demand by the Vendor, pay interest on that unpaid sum ("DEFAULT
INTEREST").
(b) Default Interest will accrue without the necessity for demand or
notice on any unpaid sum from day to day from the due date up to
the date of actual payment, before and after judgment, in
accordance with this clause. Default Interest shall be calculated
and payable by reference to successive periods. Each such period
shall be of one month or such shorter period as the Vendor may
from time to time select and the rate of interest applicable to
the unpaid amount for a particular period shall be the rate which
is two per cent above the Base Rate determined on the first day of
the relevant period or if such date is not a Business Day on the
next following Business Day. Default Interest payable under this
clause shall be due and payable at the end of each period by
reference to which it is calculated, or at the time of payment of
the relevant unpaid amount if prior to the end of such a period
(at the applicable rate but calculated daily for such part-
period), and if not paid shall be capitalised and itself bear
interest accordingly.
5.6 REMEDIES OF THE VENDOR ON DEFAULT: If the Vendor has complied, or is
in a position to comply, with its obligations under clause 5.2 and
clause 5.3 and the Purchaser does not pay, or the Vendor does not
receive, under the Letter of Credit or otherwise, the Purchase Price
or the Purchaser does not meet all of the Purchaser's other
obligations to be performed on the Settlement Date then:
(a) without prejudice to any other rights or remedies available to the
Vendor at law or in equity, the Vendor may:
(i) sue the Purchaser for specific performance; or
(ii) cancel this Agreement by notice to the Purchaser and sue the
Purchaser and/or Guarantor for damages (provided that any
such cancellation shall not affect clause 12 or clause 15.3,
each of which shall remain in effect subject to and in
accordance with its terms); and
(b) where the Vendor is entitled to cancel this Agreement, the entry
by the Vendor into a conditional or unconditional contract for the
sale of the Shares by the Vendor will take effect as a
cancellation of this Agreement by the Vendor if this Agreement has
not previously been cancelled and such resale will be deemed to
have occurred after cancellation.
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5.7 DAMAGES CLAIMABLE BY THE VENDOR: The damages claimable by the Vendor
under clause 5.6 (a)(ii) and clause 4.2 will include all damages
claimable at common law or in equity and will also include (but will
not be limited to):
(a) in the event that the Contact IPO is cancelled as a consequence of
cancellation of this Agreement, all costs incurred by the Vendor in
respect of or in relation to the Contact IPO and/or its cancellation
including, without limitation, all fees and disbursements paid or
payable by the Vendor to the Syndicate or any other advisers;
(b) in the event that the Contact IPO is delayed as a consequence of
cancellation of this Agreement, all costs incurred by the Vendor in
respect or in relation to the delay of the Contact IPO including,
without limitation, the costs involved in preparing new or amended
Offer Documents, and all fees and disbursements paid or payable by the
Vendor to the Syndicate or any other advisers in respect of the same;
and
(c) any loss incurred by the Vendor on any bona fide resale or attempted
resale of the Shares or the shares the subject of the Contact IPO. The
amount of that loss may include:
(i) in the case of cancellation under clause 5.6(a)(ii), interest on
the Purchase Price at the Default Interest rate described in
clause 5.5(b) from the Settlement Date to the settlement of such
resale; and
(ii) all costs and expenses reasonably incurred in any resale or
attempted resale,
together, in the case of cancellation under clause 5.6(a)(ii), with
interest at the Default Interest rate described in clause 5.5(b) on
any such loss from the date of settlement of the resale until payment
of the loss (and the interest thereon).
5.8 THIRD PARTY CONSENTS: The Vendor will, in its capacity as the beneficial
owner of the Company, use all reasonable endeavours to procure that the
Company co-operates with the Purchaser to seek, prior to the Settlement
Date, the consents of all parties who are parties to leases and other
contracts with the Company under which consent is necessary as a
consequence of a change in shareholding of the Company and which the
Purchaser desires to obtain.
6. CONDITIONS OF SETTLEMENT
6.1 CONDITION PRECEDENT: Settlement is conditional on the Purchase Agreement
being executed and the obligations of the parties to the Purchase Agreement
being unconditional, save in respect of any condition relating to
settlement or completion under this Agreement.
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6.2 WAIVER OF CONDITION: The condition in clause 6.1 has been inserted for the
benefit of both the Vendor and the Purchaser and may be waived only by
written agreement between them.
6.3 CONSEQUENCES OF NON-FULFILMENT: Should the condition in clause 6.1 not be
satisfied or waived by 1.00 p.m. on the Condition Date, then this Agreement
may be cancelled by written notice given by the Vendor to the Purchaser or
the Purchaser to the Vendor.
6.4 NOTIFICATION BY VENDOR: The Vendor undertakes to notify the Purchaser of
the date on which it is expected the condition in clause 6.1 will be
satisfied (being the intended date of settlement and completion under the
Purchase Agreement), and of any changes in that date, as soon as it is
aware of the same. In any event, the Vendor will give no less than three
Business Days' notice to the Purchaser of the date on which the condition
in clause 6.1 is expected to be satisfied.
6.5 CONDITION SUBSEQUENT: If, after Settlement has been completed, settlement
and completion under the Purchase Agreement does not occur on the
Settlement Date for any reason, then Settlement shall be reversed, the
transfers delivered by the Vendor under clause 5.2(a) shall be of no
further force and effect, the Purchaser shall return to the Vendor all such
transfers and any other documents delivered by the Vendor under clause 5.2
and, against such return, the Vendor shall refund the Purchase Price paid
by the Purchaser in accordance with clause 3, to the extent so paid. Upon a
refund of the Purchase Price to the Purchaser under this clause 6.5 this
Agreement shall be deemed cancelled.
6.6 EFFECT OF CANCELLATION: Upon cancellation of this Agreement under clause
6.3 or clause 6.5 all parties will be released from all of their
obligations under this Agreement provided that any such cancellation and
release:
(a) shall not discharge or otherwise affect any liability which any party
may have to any other party in respect of any breach of or failure to
comply with this Agreement prior to the time of cancellation;
(b) shall be without prejudice to any claim which any party has against
any other party in relation to any such liability; and
(c) shall not affect clause 12, or clause 15.3, each of which shall
remain in effect subject to and in accordance with its terms.
7. WARRANTIES
7.1 VENDOR'S WARRANTIES: The Vendor hereby represents and warrants in favour of
the Purchaser (which Warranties will be deemed to be repeated on each day
up to and including the Settlement Date) that:
(a) the Shares, together with the shares being offered by the Vendor
pursuant to the Contact IPO and any shares included in any over-
allotment option that
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may be granted to the Syndicate under the Purchase Agreement, comprise
all of the issued shares in the Company;
(b) the Shares are fully paid;
(c) the Shares are beneficially owned by the Vendor and the Vendor has
full power, right and authority to sell and procure the transfer of
the Shares;
(d) there are no agreements or restrictions, whether arising out of
legislation, regulations, agreement or otherwise, preventing or
restricting or inhibiting the Vendor from carrying out or procuring
such sale and transfer in the manner provided by this Agreement;
(e) on the transfer of the Shares to the Purchaser, property in the Shares
will pass to the Purchaser free from any Encumbrances;
(f) the Vendor has full power and authority to enter into this Agreement
and to carry out the transactions provided for in this Agreement, and
this Agreement has been duly executed and delivered by the Vendor and
is a valid and binding document of the Vendor;
(g) the Company has not declared or paid any dividend, or made any
distribution (as that term is defined in the Companies Act 1993), and
will not declare or pay any dividend or make any such distribution
(as the case may be), during the period beginning on 30 September 1998
and ending on (and including) the Settlement Date, other than as
disclosed in writing to the Purchaser before the Final Bid Date; and
(h) neither the Vendor nor the Company is a party to, nor will it prior to
Settlement enter into, any agreement or arrangement providing for a
right, entitlement or option for any person to take shares or
convertible securities in the Company, other than for the purposes of
the Contact IPO or as disclosed in writing to the Purchaser before the
Final Bid Date.
7.2 WARRANTIES OF THE PURCHASER AND GUARANTOR: Each of the Purchaser and the
Guarantor hereby represents and warrants in favour of the Vendor (which
Warranties will be deemed to be repeated on each day up to and including
the Settlement Date) that:
(a) it has full power and authority to enter into this Agreement and the
Standstill Deed and to carry out the transactions provided for in this
Agreement and the Standstill Deed;
(b) the execution, delivery and performance of this Agreement and the
Standstill Deed and the consummation of the transactions provided for
in this Agreement and the Standstill Deed by it has been duly
authorised by all requisite corporate action and no director of the
Purchaser or the Guarantor is
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interested in any transaction evidenced by this Agreement other than
as a director of the Purchaser or the Guarantor (as the case may be);
(c) this Agreement and the Standstill Deed have been duly executed and
delivered by it and are valid and binding upon it;
(d) it has obtained all requisite or necessary clearances, authorisations
or consents from such regulatory authorities as may be necessary,
whether in New Zealand or overseas, for the implementation of this
Agreement and the Standstill Deed including, but not limited to,
clearances or authorisations under the Commerce Act 1986 and consents
under the Oversees Investment Regulations 1995, which clearances,
authorisations or consents are valid on the Execution Date and will
remain valid up to the Settlement Date;
(e) it has obtained all requisite or necessary approvals under or waivers
from the requirements of the Listing Rules of the New Zealand Stock
Exchange or any similar rules of a recognised stock exchange for the
implementation of this Agreement and the Standstill Deed; and
(f) there was, and is, no error, misstatement or omission in respect of
the written information and confirmations provided by or on behalf of
the Purchaser to the Vendor and the Company in the Verification
Certificate in connection with the Contact IPO, as contemplated by
section 4 of the Bidding Rules.
7.3 ACKNOWLEDGEMENT: Each of the Purchaser and the Guarantor acknowledges and
agrees that, except for the Warranties of the Vendor specified in clause
7.1:
(a) it has entered into this Agreement in reliance solely on its own
judgment and not in reliance on any representations of the Vendor, the
Company, the Subsidiaries, the Company's associated companies or their
respective advisers, directors, employees, officers or agents;
(b) it has made its own independent enquiry and investigations into the
affairs of the Company, the Subsidiaries and all of the Company's
associated companies (including, without limitation, the business,
operations, financial condition, prospects, creditworthiness and
status of them) and though various information or statements of fact
or opinion may have been supplied or made to the Purchaser by the
Vendor, the Company, the Subsidiaries, the Company's associated
companies or their respective advisers, directors, employees, officers
or agents, the Purchaser unconditionally waives, and agrees not to
facilitate, assist or encourage the taking or making of, any claim
against the Vendor, the Company, the Subsidiaries, the Company's
associated companies or their respective advisers, directors,
employees, officers or agents (whether arising in tort, in contract,
by operation of law or otherwise) in respect of any such matters;
(c) all express or implied or other representations or warranties of the
Vendor, the Company, the Subsidiaries or their respective advisers,
directors,
<PAGE>
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employees, officers or agents in relation to the sale of the Shares
are hereby expressly excluded;
(d) neither the Vendor, the Company, the Subsidiaries, the Company's
associated companies nor their respective advisers, directors,
employees, officers or agents have made or make any representation or
have given or give any warranty (express or implied) as to the
accuracy, content, completeness, value or otherwise of, nor have or
accept any liability (whether arising in tort, in contract, by
operation of law or otherwise) in respect of, any information or
statements of fact or opinion (written, oral or otherwise) directly or
indirectly provided or available to or used by the Purchaser in
connection with the transactions evidenced by this Agreement and the
Purchaser unconditionally waives, and agrees not to facilitate, assist
or encourage the taking or making of, any claim against any of them in
respect of any such matters;
(e) neither the Vendor, the Company, the Subsidiaries, the Company's
associated companies nor their respective advisers, directors,
employees, officers or agents has given, or will give, any
representation or warranty as to the future prospects of the Group
including, for the avoidance of doubt, the Business; and
(f) the references in this paragraph and in the previous paragraphs of
this clause to "advisers" include references to ABN AMRO Rothschild
(the equity capital markets joint venture of the Rothschild and ABN
AMRO groups of companies), NM Rothschild & Sons Limited, Rothschild
Australia Securities Limited, NM Rothschild & Sons (Singapore)
Limited, ABN AMRO Bank NV, ABN AMRO Corporate Finance Australia
Limited, ABN AMRO Equities NZ Limited, ABN AMRO New Zealand Limited
and every Related Body Corporate of any such company and their
respective directors, officers, employees and agents and that the
acknowledgements and agreements given in the foregoing paragraphs of
this clause 7.3 are promises which confer, and are intended to confer,
a benefit upon the Vendor, the Company, the Subsidiaries, the
Company's associated companies and their respective advisers,
directors, employees, officers and agents and are intended to be
enforceable against the Purchaser and the Guarantor at the suit of
each such person pursuant to the Contracts (Privity) Act 1982.
7.4 ENTIRE AGREEMENT: This Agreement together with the Bid Bond, the Letter of
Credit, the deed of indemnity (in the form set out in Schedule 3), the
Standstill Deed and the confidentiality deed entered into by the party
named in Schedule 6 and dated as specified in Schedule 6 in favour of the
Vendor and other named beneficiaries:
(a) constitutes the entire understanding and agreement of the parties
relating to the sale and purchase of the Shares; and
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(b) supersedes and extinguishes all other agreements and understandings
between the parties relating to that sale and purchase prior to the
date of this Agreement.
8. PENDING SETTLEMENT
8.1 CONDUCT OF BUSINESS: Pending Settlement, and notwithstanding that the
Vendor executes this Agreement on the Execution Date, the Vendor will use,
or undertakes that it has used, in its capacity as beneficial owner of the
Shares, all reasonable endeavours to procure that, from the Final Bid Date:
(a) each member of the Group will:
(i) subject to paragraph (b) of this clause 8.1, operate and
conduct the Business in the normal course of business in
accordance with the business practices employed by the Group as
at the Final Bid Date;
(ii) properly keep and maintain all necessary books of account
(reflecting in a true and fair manner, in accordance with the
accounting policies of the Group as at the Final Bid Date, all
transactions effected by the Group or to which it has been a
party, in so far as they relate to the Business), minute books,
records, the share register and other statutory registers and
books;
(iii) maintain its assets in as good a state of operating condition
and repair as they are on the Final Bid Date, except for
ordinary depreciation and fair wear and tear;
(iv) maintain in full force and effect all existing insurances in
respect of the Business and the assets of the Business;
(v) promptly notify the Purchaser (other than in respect of normal
debt collection) of any law suits, claims, proceedings,
investigations or adverse events which may occur, be threatened,
brought, asserted or commenced against it, its officers or
directors, involving in any way the Business or the assets of
the Business; and
(vi) use its best efforts to preserve intact its good name and
reputation, and its existing relationships with suppliers of
goods and services, employees, governmental authorities and
customers; and
(b) each member of the Group will not, without the prior written consent
of the Purchaser (such consent not to be unreasonably withheld):
(i) make any alterations to its existing constitution or name, or
take any steps towards altering its capital structure, other than
as disclosed in writing to the Purchaser before the Final Bid
Date;
<PAGE>
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(ii) declare or pay, or approve the declaration or payment of, any
dividend or otherwise make any distribution (as that term is
defined in the Companies Act 1993), other than as disclosed in
writing to the Purchaser before the Final Bid Date;
(iii) alter, or agree to alter, the remuneration or any of the
conditions of employment of its directors, officers or employees
in force as at the Final Bid Date provided however that changes
of remuneration or conditions may be made consistent with the
business practices employed by it as at the Final Bid Date;
(iv) make, or enter into a legal commitment in respect of, or draw
down or use any borrowing or other facilities for, any item of
capital expenditure not consistent with the capital expenditure
projections attached as Schedule 5;
(v) give any guarantee of or indemnity in respect of the liabilities
of any other person other than to any party to the Purchase
Agreement or in the ordinary course of business;
(vi) create or allow any Encumbrance to arise over the Business or
assets of the Business (other than any title retention arising
in the ordinary course of business or any Encumbrance arising by
operation of law); or
(vii) dispose of any of the assets or undertakings of the Business,
other than disposals in the ordinary course of business, for a
cash consideration payable in full at the time of disposal equal
to or greater than book value, or disposals of redundant or
other non-material assets;
and in any case of action taken or omitted to be taken in accordance with
either clauses 8.1(a) or 8.1(b), that action is taken or not taken (as the
case may be) having regard to, and in such a manner so as not to be
inconsistent with the contents of the Offering Documents in the forms of
the drafts of such documents as at the Final Bid Date, subject to any
amendments required to be made in order to ensure the Offering Documents
meet the requirements of all relevant laws.
8.2 EVENTS PENDING SETTLEMENT: If any event, matter or thing (other than a
breach of the Vendor's Warranties, or other agreement of the Vendor to be
performed by it under this Agreement, in either case as a result solely of
the Vendor's actions) occurs pending Settlement that affects the value of
the Shares, or if anything comes to the Purchaser's attention that may
influence the decision of it or a purchaser to complete the purchase of the
Shares and whether material or not, and whether or not amounting to force
majeure, the Purchaser will not be able to re-negotiate the Purchase Price
nor claim any deduction, set-off or counterclaim in respect thereof nor
refuse to settle.
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8.3 ORDERS IN COUNCIL: The Vendor will use all reasonable endeavours to
promulgate the Orders in Council as soon as is reasonably practicable after
the Settlement Date.
9. RESTRICTIONS
This clause 9 shall have no force or effect prior to Settlement, but shall
come into full force and effect as from Settlement.
9.1 DISCLOSURE OF INFORMATION: As further consideration for the Purchaser
agreeing to purchase the Shares, the Vendor hereby undertakes with the
Purchaser that it will not, except with the written consent of the
Purchaser, or as required by law, at any time after Settlement itself make
use of or disclose to any person any information of a secret or
confidential nature supplied to it by the Company and relating to the
Business.
9.2 GOVERNMENT DOCUMENTS:
(a) The Purchaser hereby undertakes with the Vendor that if any Government
Documents are in or come into the possession of any member of the
Group, any company associated to the Company or the Purchaser, the
Purchaser will (or will procure that the relevant member of the Group,
or, to the extent that it is able, any company associated to the
Company, will) promptly deliver them to the State Services Commission
or any other person nominated for this purpose by the Vendor.
(b) The Vendor will, at the request of the Purchaser, formulate and agree
procedures with the Purchaser and/or any one or more members of the
Group for its reasonable access to any Government Documents the
Purchaser or the relevant member or members of the Group need or needs
for the purposes of any legal action or proceedings or the carrying on
of the Business or its other activities.
9.3 CONFIDENTIAL INFORMATION;
(a) All confidential information (including Government Documents) in the
possession of a member of the Group or any company associated to the
Company relating to the business or activities carried on or out prior
to the Settlement Date by any government department or ministry
("CONFIDENTIAL INFORMATION") but excluding such confidential
information (other than Government Documents) which is the property of
a member of the Group, will be kept confidential by the Purchaser, the
Group and its employees, and, to the extent the Purchaser can procure
the same (using best endeavours), any company associated to the
Company, unless:
(i) the Purchaser, any member of the Group, any company associated to
the Company or any employee is required by law or the listing
<PAGE>
-17-
requirements of a recognised stock exchange to disclose that
Confidential Information; or
(ii) the Vendor agrees in writing that that Confidential Information
may be disclosed.
(b) Furthermore, upon any termination of this Agreement, or upon demand by
the Vendor or its advisers, the Purchaser will:
(i) either return to such person as they may direct or destroy, at
the option of the Vendor or its advisers (as the case may be),
all of the Confidential Information (including copies thereof) in
the possession or control of the Purchaser or its directors,
officers, employees, related companies or its legal, accounting,
taxation or financial advisers; and
(ii) destroy all copies of any analyses, compilations, studies or
other documents prepared by the Purchaser or for the Purchaser's
use containing or reflecting any Confidential Information
excluding, in the case of advisers to the Purchaser:
(A) particular documents and materials held on solicitors' files
and which continue to be held on such files; and
(B) those documents and materials that may reasonably be
required for internal audit purposes or as a justification
for any advice that may have been provided by any such
adviser to the Purchaser regarding the acquisition of the
Shares under this Agreement.
(c) Upon the return or destruction (as the case may be), as specified in
paragraph (b), of all such Confidential Information, the Purchaser
will provide to the Vendor a certificate from an authorised officer of
the Purchaser stating that the Purchaser has complied with its
obligations under this clause.
9.4 DISCLOSURE: If the Purchaser, any member of the Group, any company
associated to the Company, that associated company or any employee is
required by law to disclose any Confidential Information the Purchaser
will, subject to its legal obligations:
(a) consult with the Vendor prior to the Purchaser, that member of the
Group, that associated company or that employee making such
disclosure; and
(b) procure (or, in the case of such an associated company, use best
endeavours to procure) that all reasonable requirements of the Vendor
in relation to the disclosure of that Confidential Information are
followed strictly.
9.5 CLAUSE 9 TO SURVIVE TERMINATION: The obligations of the Purchaser under
this clause 9 will survive termination of this Agreement.
<PAGE>
-18-
10. PURCHASER'S COVENANTS
10.1 INDEMNITY: The Purchaser will indemnify and keep indemnified the Vendor in
respect of, and to the extent of, any costs, losses, damages, claims,
liabilities and expenses incurred or suffered by the Vendor, or which may
be made against it, as a result of or attributable to:
(a) any matter or thing at any time being found to be other than as
warranted or agreed by the Purchaser under any provision of this
Agreement; or
(b) any failure by the Purchaser to perform its obligations under this
Agreement.
10.2 NO ACTION AGAINST OFFICERS: The Purchaser and the Guarantor, at all times
after Settlement, agree not to take, institute or make, or facilitate,
assist or encourage the taking, instituting or making of, and will, to the
extent they can do so, procure, and will otherwise use all reasonable
endeavours to procure that, no member of the Group or the Company's
associated companies takes, institutes or makes any action, proceeding,
claim or demand against:
(a) any present or former director or officer of the Company or the
Subsidiaries or the Company's associated companies (in such person's
capacity as a director or officer of the Company or the Subsidiaries,
or the Company's associated companies, or purporting to act as such,
or in any other capacity acting or purporting to act on behalf of the
Company or the Subsidiaries, or the Company's associated companies,
or arising out of such person's association with, or wish to assist,
the Company or the Subsidiaries or the Company's associated
companies) in respect of any act, omission, matter or thing arising
or occurring on or prior to the Settlement Date except in so far as
such act, omission, matter or thing is the result of a lack of good
faith by such director or officer; or
(b) any present or former shareholder of (or beneficial owner of shares
in the capital of) the Company or the Subsidiaries or the Company's
associated companies (in such person's capacity as shareholder) in
respect of any act, omission, matter or thing arising or occurring
prior to the Settlement Date except in so far as such act, omission,
matter or thing may give rise to a claim against the Vendor under an
express provision of this Agreement.
The undertaking contained in this clause is given for the benefit of each
present or former director, officer or shareholder of (or beneficial owner
of shares in the capital of) the Company and the Subsidiaries and the
Company's associated companies and is intended to be enforceable against
the Purchaser at the suit of each such person pursuant to the Contracts
(Privity) Act 1982.
<PAGE>
-19-
10.3 INDEMNITY FOR ERRORS ETC. IN INFORMATION FOR CONTACT IPO: On the
Execution Date the Purchaser and the Guarantor will enter into the
indemnity in the form set out in Schedule 3. The undertaking contained
in this clause is given for the benefit of each of the Vendor, the
Company, its directors and former directors and each member of the
Syndicate and is intended to be enforceable against the Purchaser at
the suit of each such person pursuant to the Contracts (Privity) Act
1982.
11. NO GREATER RIGHTS
Notwithstanding any other provision of this Agreement, the Purchaser:
(a) acknowledges that the Company and the Subsidiaries and the
Company's associated companies have no better title to any asset
transferred, or purportedly transferred, by ECNZ to the Company
pursuant to the sale and purchase agreement dated 13 November 1995
between ECNZ and the Company than that title which ECNZ had in
respect of that asset as at the date of settlement of such
agreement; and
(b) agrees to waive, release and discharge forever, and to use
reasonable endeavours to procure that, as soon as is practicable
after Settlement, the Company and each Subsidiary and each company
associated to the Company will waive, release and discharge
forever, all past, present and future actions, claims, rights,
suits, demands and proceedings of every kind whatever available to
it against ECNZ in respect of any such asset that has not been
validly transferred to the Company under that sale and purchase
agreement as a result of ECNZ not having had good title to that
asset as at the date of settlement of such agreement, each of
those waivers to be in a form satisfactory to the Vendor.
12. GUARANTEE AND INDEMNITY
12.1 GUARANTEE: The Guarantor unconditionally and irrevocably guarantees to
the Vendor:
(a) the due and punctual payment by the Purchaser of all moneys which:
(i) from time to time become due from the Purchaser to the Vendor
under this Agreement; or
(ii) arise out of or are payable in relation to any breach by the
Purchaser of or failure by the Purchaser to comply with any of
its obligations under this Agreement; and
(b) the due, punctual and proper performance and observance by the
Purchaser of all of its other obligations under this Agreement.
<PAGE>
- 20 -
12.2 NO DISCHARGE: The liability of the Guarantor under this guarantee
will constitute a principal obligation of the Guarantor and will not
be discharged, released or otherwise affected:
(a) by any delay, grant of time, release or compromise granted by the
Vendor to the Purchaser or any other person;
(b) by cancellation or termination of this Agreement;
(c) by the Vendor exercising or refraining from exercising any rights
against the Purchaser or any other person; or
(d) by any other act, omission, matter, circumstance or law whereby
the Guarantor would, but for the provisions of this clause, have
been released from liability under this Agreement.
12.3 CONTINUING GUARANTEE: This guarantee will remain in full force and
effect until all liabilities and obligations of the Purchaser under
this Agreement (including, without limitation, any liability of a
type referred to in clause 6.6) have been fully discharged and all
moneys payable to the Vendor under this Agreement have been fully
paid, including moneys the payment or satisfaction of which is
subsequently avoided or affected in any way, whether under any
statutory provision or otherwise, so as to deprive the Vendor of the
full benefit of such payment or satisfaction.
12.4 INDEMNITY: As a separate and independent obligation, the Guarantor
will be liable, and agrees to indemnify the Vendor, for all costs,
losses, damages, claims, liabilities and expenses incurred or
suffered by the Vendor, or that may be made against it, as a result
of:
(a) the failure on the part of the Purchaser to pay all moneys that
from time to time become due from the Purchaser to the Vendor
under this Agreement; or
(b) any breach of any other obligation of the Purchaser under this
Agreement.
12.5 PAYMENT: The Guarantor will pay to the Vendor on demand all amounts
payable pursuant to the guarantee and the indemnity contained in this
clause 12.
12.6 ABILITY TO ENFORCE: The Vendor may enforce the guarantee and the
indemnity contained in this clause 12 against the Guarantor without
first taking any steps or proceedings against the Purchaser.
<PAGE>
-21-
13. EXPENSES
Whether or not any of the transactions contemplated by this Agreement
are consummated, each of the parties will (unless otherwise specified
in this Agreement) bear its own legal and accountancy costs and other
expenses of and incidental to the preparation, negotiation, execution
of this Agreement and Settlement.
14. DELAY IN EXERCISE OF RIGHTS
14.1 NO DELAY: No delay, grant of time, release, compromise, forbearance
(whether partial or otherwise) or other indulgence by one party in
respect of any breach of any other party's obligations under this
Agreement is to:
(a) operate as a waiver of or prevent the subsequent enforcement of
that obligation; or
(b) be deemed a delay, grant of time, release, compromise, forbearance
(whether partial or otherwise) or other indulgence in respect of,
or a waiver of, any subsequent or other breach.
14.2 EXERCISE OF RIGHTS AND WAIVERS:
(a) Time is of the essence in this Agreement but no failure to
exercise, and no delay in exercising, a right by a party will
operate as a waiver of that right, nor will a single or partial
exercise of a right preclude another or further exercise of that
right or the exercise of another right.
(b) No waiver by a party of its rights under this Agreement will be
effective unless it is in writing signed by that party.
14.3 PARTIAL INVALIDITY: The illegality, invalidity or unenforceability of
a provision of this Agreement under any law will not affect the
legality, validity or enforceability of that provision under another
law or the legality, validity or enforceability of another provision.
15. FURTHER ASSURANCES AND POST SETTLEMENT
15.1 FURTHER ASSURANCES: The parties will sign, execute and do all deeds,
schedules, acts, documents and things as may reasonably be required by
any other party, effectively to carry out and give effect to the terms
and intentions of this Agreement, whether before or after Settlement.
Without limiting the generality of the foregoing the Purchaser and the
Guarantor will not take any steps that might adversely affect the
success of the Contact IPO.
<PAGE>
- 22 -
15.2 POST SETTLEMENT: Notwithstanding Settlement, and to the extent that
any provision of this Agreement is not performed or fulfilled at
Settlement, that provision will not merge on Settlement and will
continue in full force and effect.
15.3 PUBLIC ANNOUNCEMENTS: The Purchaser agrees that it will not make any
public statement or announcement with respect to this Agreement or any
matter which is provided for in this Agreement or the Contact IPO,
including without limitation the signing of this Agreement and
Settlement nor will it enter into any discussion or correspondence, or
otherwise have any communications of any nature, with any financial
institution, analyst, broker or any other person in respect of the
Contact IP0 (other than its financial adviser engaged prior to the
date of this Agreement to assist it solely in respect of its
acquisition of the shares), except in the case of a public
announcement or statement where and to the extent that any such public
statement or announcement is required by law, the listing requirements
of a recognised stock exchange or the constitution (or its equivalent)
of the Purchaser or the (Guarantor and then only in strict accordance
with the Securities Act 1978, the Securities Regulations 1983 and the
securities laws of any other relevant jurisdiction, having regard to
the Contact IPO, and not without the Purchaser:
(a) having provided the Vendor with a reasonable opportunity to
comment on the proposed public statement or announcement prior to
the making of the same; and
(b) having considered, and having not declined (other than on
reasonable grounds) to take account of, any comments which the
Vendor may make.
16. AMENDMENTS
No amendment to this Agreement will be effective unless it is in
writing and signed by all the parties.
17. ASSIGNMENT
17.1 SUCCESSORS: This Agreement will be binding on and enure for the
benefit of the parties and their respective successors and, in the
case of the Purchaser, its permitted assignees or transferees.
17.2 ASSIGNMENT:
(a) The Purchaser may not assign or transfer all or any part of its
rights or obligations under this Agreement without the prior
written consent of the Vendor, which may be given or withheld by
the Vendor at its absolute discretion and, if given, given on such
terms as it thinks fit.
<PAGE>
-23-
(b) Each permitted assignee or transferee of the Purchaser will have
the same rights against the Vendor under this Agreement as if
named in this Agreement as Purchaser.
18. NOTICES
18.1 FORM OF NOTICE: Any notice or other communication to be made or
delivered to any party under this Agreement is to be:
(a) in writing;
(b) signed by a person authorised by the sender; and
(c) sent by facsimile, personal delivery or post to the facsimile
number or address, and marked for the attention of the person or
office holder (if any), from time to time designated by that party
to the other parties for the purposes of this Agreement.
The initial facsimile number, address and relevant person or office
holder of the Vendor is set out under its name at the end of this
Agreement, and for the Purchaser and the Guarantor is set out in
Schedule 6.
18.2 NOTICE EFFECTIVE: No communication is to be effective until received.
A communication will, however, be deemed to be received by the
addressee:
(a) in the case of a facsimile, on the Business Day on which it is
despatched or, if despatched after 5:00 p.m. (in the place of
receipt) on a Business Day or, if despatched on a non-Business
Day, on the next Business Day after the date of dispatch, in each
case evidenced by the receipt of a transmission report from the
machine on which the facsimile was transmitted;
(b) in the case of personal delivery, when delivered;
(c) in the case of a letter, if posted to an overseas address, on the
third Business Day after posting by airmail, and if posted to a
postal address in New Zealand, on the first Business Day after
posting by fastpost; and
(d) in the case of a communication to the Purchaser or Guarantor
where the Purchaser or Guarantor comprises two or more persons,
by receipt or deemed receipt by any one or more of such persons.
19. COUNTERPARTS
(a) This Agreement may be executed in two or more counterparts
(including facsimile copies) each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
<PAGE>
- 24 -
(b) A party may enter into this Agreement by executing any
counterpart.
20. GOVERNING LAW
20.1 NEW ZEALAND LAW: This Agreement is to be governed by and construed in
accordance with the laws of New Zealand.
20.2 SUBMISSION TO JURISDICTION: Each of the parties irrevocably and
unconditionally agrees that the Courts of New Zealand have non-
exclusive jurisdiction to hear and determine every matter that may
arise out of or in connection with this Agreement.
20.3 WAIVER OF IMMUNITY: The Vendor acknowledges that its obligations under
this Agreement are private and commercial acts and, to the maximum
extent permissible by law, irrevocably waives any rights to claim
sovereign or other immunity from suit or action or process in respect
of its obligations under this Agreement.
21. PROCESS AGENT
(a) The Purchaser and the Guarantor severally appoint the person
specified in Schedule 6 (registered office of which at the
Execution Date is set out in Schedule 6) in New Zealand to
receive, for it and on its behalf, service of process of any legal
action or proceedings in New Zealand arising out of or in
connection with this Agreement and warrants that such person has
agreed to so act (and that appointment will only be revocable if,
contemporaneously with that revocation, the Purchaser or the
Guarantor (as the case may be) appoints a substitute process agent
in New Zealand acceptable to the Vendor and warrants that such
person has agreed to so act).
(b) Such service will be deemed completed on delivery to that process
agent (whether or not it is forwarded to and received by the
Purchaser or the Guarantor (as the case may be)).
EXECUTED as an agreement.
<PAGE>
-25-
SIGNED on behalf of )
HER MAJESTY THE QUEEN ) /s/ BILL ENGLISH
IN RIGHT OF NEW ZEALAND ) ----------------
acting through her Minister of )
Finance BILL ENGLISH )
in the presence of: )
/s/ ILLEGIBLE SIGNATURE Signature of Witness
-----------------------------
Solicitor Occupation
-----------------------------
Wellington Address
-----------------------------
Address: Commercial and Financial Branch, The Treasury, 1 the Terrace,
Wellington
Facsimile No.:499 0437
Attention: Branch Manager
SIGNED on behalf of )
HER MAJESTY THE QUEEN ) /s/ A. L. SMITH
IN RIGHT OF NEW ZEALAND ) ---------------
acting through her Minister )
Responsible for Contact Energy )
Limited A. LOCKWOOD SMITH )
in the presence of: )
/s/ ILLEGIBLE SIGNATURE Signature of Witness
-----------------------------
/s/ Solicitor Occupation
-----------------------------
/s/ Wellington Address
-----------------------------
Address: Commercial and Financial Branch, The Treasury, 1 the Terrace,
Wellington
Facsimile No.:499 0437
Attention: Branch Manager
<PAGE>
- 26 -
SIGNED as a deed by ) /s/ GERRY LOUGHMAN
EDISON MISSION ENERGY ) --------------------------------
TAUPO LIMITED in the ) Authorised Signatory
presence of: )
) /s/ MICHAEL KELLAND
) ---------------------------------
) Authorised Signatory
Witness:
/s/ THOMAS ROBERT FAIL
- ---------------------------
Signature of witness of
/s/ Thomas Robert Fail
- ---------------------------
Full name of witness
Solicitor
- ---------------------------
Occupation of witness
Wellington
- ---------------------------
Address of witness
SIGNED as a deed by ) /s/ GERRY LOUGHMAN
EDISON MISSION ENERGY ) ---------------------------------
in the presence of: ) Authorised Signatory
)
) /s/ MICHAEL KELLAND
) ---------------------------------
) Authorised Signatory
Witness:
/s/ THOMAS ROBERT FAIL
- ---------------------------
Signature of witness
Thomas Robert Fail
- ---------------------------
Full name of witness
Solicitor
- ---------------------------
Occupation of witness
Wellington
- ---------------------------
Address of witness
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
REGISTERED HOLDERS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Name and Address Holding of Shares Shares Subject to This
Agreement
- -----------------------------------------------------------------------------------------
Minister of Finance 301,975,000 ordinary shares 120,790,000 ordinary shares
Parliament Buildings
Wellington
- -----------------------------------------------------------------------------------------
Minister Responsible for 301,975,000 ordinary shares 120,790,000 ordinary shares
Contact Energy Limited
Parliament Buildings
Wellington
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 2
FORM OF LETTER OF CREDIT
[Issuer Letterhead]
IRREVOCABLE STANDBY
LETTER OF CREDIT NO. [ ]
DATED: [ ]
To: [Crown]
[address]
[Acceptable Bank] (the "Issuer") hereby issues this irrevocable standby
Letter of Credit No. [ ] in favour of [Crown] (the "Beneficiary") at the
request of [Purchaser/Other party] (the "Account Party") [on behalf of
[Purchaser] (the "Purchaser").
This Letter of Credit is issued in connection with the [Account
Party's/Purchaser's] obligations to pay certain amounts pursuant to an
Agreement for the Sale and Purchase of Shares in Contact Energy Limited
dated [ ] 1999 between the Beneficiary and the [Account
Party/Purchaser] [and other/s] (the "Agreement") for the sum of [Purchase
Price (or part thereof, if more than one letter of credit)] New Zealand
Dollars (NZ$[Purchase Price (or part thereof, if more than one letter of
credit)]) (the "Maximum Amount") and shall expire on the date of receipt by
the Beneficiary of the Maximum Amount in accordance with this Letter of
Credit or 7 November 1999 whichever is the earlier (the "Expiry Date").
This Letter of Credit is available for payment up to, in aggregate, the
Maximum Amount immediately on presentation at [New Zealand Address] no
later than 3pm on a business day on or before the Expiry Date of a
communication purporting to be from the Beneficiary to the Issuer quoting
"Drawing under [Issuer] Standby Letter of Credit No. [ ] dated
[ ]" and containing the following statement: "We certify on
behalf of the
<PAGE>
-2-
Beneficiary that the [Account Party/Purchaser] has failed to pay NZ$[ ]
being [the whole/part] of the Purchase Price under the Agreement. We
therefore make demand on you under the above referenced letter of credit
in the amount of NZ$[ ]. Please pay this amount to [nominated
account details]. Terms used in this communication have the same meaning
as in the above referenced Letter of Credit."
Partial drawings are permitted.
The Issuer undertakes to the Beneficiary that demands made in compliance
with the terms of this Letter of Credit will be duly honoured on
presentation without reference to the Account Party and agrees to pay the
funds demanded telegraphically, with same day value to the Beneficiary's
nominated account referred to in the demand without any discount,
deduction, set-off or counterclaim whatsoever.
Except as otherwise stated herein this Letter of Credit is subject to the
Uniform Customs and Practice for Documentary Credits 1993 Revision
International Chamber of Commerce Publication No. 500 and, subject to
that, is governed by, and is to be construed in accordance with the
provisions of, the laws of New Zealand. The Issuer irrevocably submits to
the nonexclusive jurisdiction of the courts of New Zealand in respect of
any matter arising in relation to this Letter of Credit.
SIGNED by
[Issuer]
by:
in the presence of:
------------------------
------------------------
------------------------
<PAGE>
SCHEDULE 3
FORM OF INDEMNITY
- --------------------------------------------------------------------------------
DEED OF INDEMNITY
THIS DEED dated the day of 1999
BETWEEN HER MAJESTY THE QUEEN IN RIGHT OF NEW ZEALAND acting by and through
her MINISTER OF FINANCE and her MINISTER RESPONSIBLE FOR CONTACT
ENERGY LIMITED (the "CROWN")
AND EDISON MISSION ENERGY TAUPO LIMITED (the "PURCHASER")
AND EDISON MISSION ENERGY (the "GUARANTOR")
RECITALS:
A. The Purchaser has, contemporaneously with this deed, entered into an
agreement for sale and purchase (the "AGREEMENT FOR SALE AND PURCHASE")
with the Crown pursuant to which it will acquire from the Crown 241,580,000
of the shares in Contact Energy Limited (the "COMPANY"), being 40.0% of the
issued shares in the Company.
B. The Crown intends to sell the remaining 362,370,000 shares in the Company
by means of an initial public offering of the shares involving a combined
global offering to members of the public and institutional and professional
investors in New Zealand and to institutional and professional investors in
Australia (the "AUSTRALASIAN OFFERING"), and to institutional and
professional investors in the United States and other countries (the
"INTERNATIONAL OFFERING").
C. The Purchaser has provided certain written information to the Crown and the
Company for inclusion in offering documents relating to the Contact IPO.
D. Such information includes information relating to the Purchaser's
operations and differences in strategic vision in relation to the Company
from that outlined in the offering documents.
<PAGE>
-2-
E. In terms of the Agreement for Sale and Purchase, the Purchaser has agreed
to indemnify the Crown, the Company, its directors and former directors and
each member of the Syndicate against, amongst other things, any loss or
liability arising as a result of, or attributable to, any error, or
misstatement or omission in respect of such information.
F. The parties wish to record the terms of the indemnity as set out below.
WITNESSES AS FOLLOWS:
1. INTERPRETATION
1.1 DEFINITIONS: In this deed (including in the Recitals), unless the
context otherwise requires:
"AGREEMENT FOR SALE AND PURCHASE" is defined in Recital A;
"AUSTRALASIAN OFFERING" is defined in Recital D of the Agreement for
Sale and Purchase;
"BIDDING RULES" means the bidding rules dated January 1999 issued by
the Crown relating to the sale of shares in the Company by
international tender, as the same may have been amended from time
to time, the operative version of which as at the Final Bid Date is
attached as the schedule to this deed;
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on
which registered banks (within the meaning of the Reserve Bank of
New Zealand Act 1989) are open for the transaction of normal banking
business in Wellington;
"COMPANY" is defined in Recital A;
"CONTACT IPO" means the intended initial public offering of up to
362,370,000 shares in the Company to be effected by means of the
Australasian Offering and the International Offering;
"FINAL BID DATE" means the final date for delivery of final bids
under the Bidding Rules, as set out in clause 3.5 of the Bidding
Rules and as amended, if at all, by the Crown in accordance with the
Bidding Rules;
"INDEMNIFIED PARTIES" means the Crown, the Company, the directors
and former directors of the Company and every member of the
Syndicate;
<PAGE>
-3-
"INFORMATION" means any and all written information and
confirmations in the Verification Certificate;
"INTERNATIONAL OFFERING" is defined in Recital D of the Agreement
for Sale and Purchase;
"LIABILITIES" includes, but is not limited to, all claims, losses,
costs (including legal costs), damages, charges and expenses which
the Indemnified Parties, or any of them, may suffer or incur in
respect of any action or claim, including all proceedings, suits,
enquiries or investigations, which may be brought or threatened to
be brought against the Indemnified Parties, or any of them, and
whether or not such proceedings are successful, compromised or
settled and however the liabilities are suffered or properly and
reasonably incurred in disputing any such proceedings;
"OFFERING DOCUMENTS" means the documents that are, or are intended
to be, made available to potential investors in the Company in
relation to the Contact IPO, whether in New Zealand or elsewhere;
"RELATED BODY CORPORATE" bears the same meaning as in the Securities
Amendment Act 1988;
"SYNDICATE" means ABN AMRO Rothschild (the equity capital markets
joint venture of the Rothschild and ABN AMRO groups of companies),
NM Rothschild & Sons Limited, Rothschild Australia Securities
Limited, ABN AMRO Bank NV, ABN AMRO Corporate Finance Australia
Limited, and every Related Body Corporate of any such company, and
every other person identified in any of the Offering Documents as a
manager and/or co-lead manager of the International Offering and/or
the Australasian Offering;
"VERIFICATION CERTIFICATE" means the certificate referred to in
section 4 of the Bidding Rules;
1.2 PARTIES: In this deed, a reference to any party is to a party to
this deed and includes, as far as is consistent with the provisions
of this deed, that party's successors in title and permitted
assigns.
1.3 STATUTES: In this deed, any reference to a statute or statutory
provision, or order or regulation made under it, includes:
(a) that statute, provision, order or regulation, as amended,
modified, re-enacted or replaced from time to time; and
<PAGE>
-4-
(b) any previous statute, statutory provision, order or regulation
amended, modified, re-enacted or replaced by that statute,
provision, order or regulation.
1.4 GENERAL REFERENCES: In this deed, any reference to:
(a) a "PERSON" includes an individual, body corporate, an
association of persons (whether corporate or not), a trust,
estate and agency of a state (in each case, whether or not
having separate legal personality and whether incorporated or
existing in New Zealand or elsewhere);
(b) a "SUBSIDIARY" is to a subsidiary as defined in the Companies
Act 1993 or the Corporations Law (Australia);
(c) one gender includes each other gender;
(d) the singular includes the plural and vice versa;
(e) an agreement includes that agreement as modified,
supplemented, novated or substituted from time to time; and
(f) time is to New Zealand standard time.
1.5 HEADINGS: Headings are to be ignored in construing this deed.
1.6 JOINT AND SEVERAL - PURCHASER: Where two or more persons are named
as "the Purchaser" the expression "the Purchaser" shall be a
reference to each of the said persons severally as well as any two
or greater number of them jointly, and the obligations and
agreements of the Purchaser in this deed shall bind each of them and
every two or greater number of them jointly and each of them
severally provided however that the delivery by or on behalf of the
Crown of any notice, document or information to any one or more of
them shall be deemed to be delivery to all of them.
1.7 JOINT AND SEVERAL - GUARANTOR: Where two or more persons are named
as "the Guarantor" the expression "the Guarantor" shall be a
reference to each of the said persons severally as well as any two
or greater number of them jointly, and the obligations and
agreements of the Guarantor in this deed shall bind each of them and
every two or greater number of them jointly and each of them
severally provided however that the delivery by or on behalf of the
Crown of any notice, document or information to any one or more of
them shall be deemed to be delivery to all of them.
<PAGE>
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1.8 JOINT AND SEVERAL - GENERAL: The obligations and agreements of the
Purchaser and the Guarantor in this deed shall bind each of them and
every two or greater number of them jointly and each of them
severally.
2. WARRANTY AS TO INFORMATION
The Purchaser and the Guarantor represent and warrant to the Indemnified
Parties that:
2.1 STATEMENTS OF FACT: all statements of fact contained in the
Information are true and accurate in all material respects and not
misleading in any material respect;
2.2 STATEMENTS OF OPINION: all statements of opinion and all statements
of intention and expectation in the Information are honestly held by
it after careful consideration and such expressions of opinion and
statements of intention and expectation are fair and reasonable; and
2.3 NO OMISSIONS: the Information does not omit any particular which is
material in the context of the Contact IP0.
3. INDEMNITY
3.1 INDEMNIFICATION BY PURCHASER AND GUARANTOR: The Purchaser and the
Guarantor hereby indemnifies and saves harmless each of the
Indemnified Parties from and against any and all Liabilities, and
any other claims, losses, costs (including legal costs), damages,
charges and expenses which the Indemnified Parties, or any of them,
may suffer or incur, in each case arising out of or attributable to
any breach of the representations and warranties set out in clause 2
where the Information in respect of which the breach arises is
included in or referred to, in any way, (provided such is not
materially different to the form in which it was provided) in all or
any of the Offering Documents or relied upon by any of the
Indemnified Parties in the compilation of all or any of the Offering
Documents.
3.2 LIABILITIES: Without limiting the generality of clause 3.1, the
indemnity contained in that clause shall extend to, and for the
purposes of this deed be read to include any liabilities arising:
(a) by virtue of the terms of, or by the reference to, any
document by which the Contact IP0 is made;
(b) by virtue of the communication, disclosure or use of any of
the Information (materially in the form in which it was
<PAGE>
-6-
provided) which has been disclosed by or on behalf of the
Purchaser for the purposes of the formulation, preparation and
implementation of the Contact IPO or all or any of the
Offering Documents;
(c) whether or not the liabilities arise in tort, contract, by
statute, by operation of law or otherwise howsoever; and
(d) wherever and whenever the liabilities are suffered, incurred
or brought.
3.3 DEFENCE OF CLAIMS: If any legal proceeding shall be instituted, or
any claim or demand made, against any Indemnified Party in respect
of which the Purchaser and/or Guarantor may be liable hereunder,
such Indemnified Party shall give prompt written notice thereof to
the Purchaser and Guarantor, and if they accept liability hereunder,
the Purchaser and/or Guarantor shall have the right to defend any
such litigation, action, suit, demand or claim for which such
Indemnified Party may seek indemnification, provided that:
(a) the Purchaser and/or Guarantor obtains an opinion from counsel
nominated by the Crown that they have a better than even
prospect of success;
(b) the reputation of the Indemnified Parties is not unduly
harmed; and
(c) the insurers of the Indemnified Party do not object to the
defence of the litigation, action, suit, demand or claim by
the Purchaser and/or Guarantor;
unless the legal proceeding instituted, or the claim or demand made,
relates solely and exclusively to the Information, in which case the
Purchaser and the Guarantor shall have an unconditional right to
defend any such litigation, action, suit, demand or claim but only
insofar as the relevant legal proceedings, claim or demand continues
at all times thereafter to be related solely and exclusively to the
Information. The Crown shall extend reasonable co-operation in
connection with and such defence, which shall be at the expense of
the Purchaser and Guarantor.
3.4 DEFENCE BY CROWN: If the Purchaser or Guarantor shall not have the
right to assume the defence of any litigation, action, suit, demand
or claim in accordance with clause 3.3, the Indemnified Parties
shall have the absolute right to control the defence of and to
settle, in their sole discretion and without the consent of the
Purchaser or Guarantor, such litigation, action, suit, demand or
claim.
<PAGE>
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4. CONTRACTS (PRIVITY) ACT
The warranties, covenants and agreements given by the Purchaser and the
Guarantor in this deed are given for the benefit of each of the Indemnified
Parties and are intended to be enforceable at the suit of each of them
pursuant to the Contracts (Privity) Act 1982.
5. ASSIGNMENT
Neither the Purchaser nor the Guarantor may assign or transfer all or any
part of its rights or obligations under this deed without the prior written
consent of the Crown, which such consent may be given or withheld by the
Crown at in absolute discretion and, if given, given on such terms and
conditions as it thinks fit.
6. DELAY AND EXERCISE OF RIGHTS
6.1 NO DELAY: No delay, grant of time, release, compromise, forbearance
(whether partial or otherwise) or other indulgence by one party in
respect of any breach of any other party's obligations under this
deed is to:
(a) operate as a waiver of or prevent the subsequent enforcement of
that obligation; or
(b) be deemed a delay, grant of time, release, compromise,
forbearance (whether partial or otherwise) or other indulgence
in respect of, or a waiver of, any subsequent or other breach.
6.2 EXERCISE OF RIGHTS AND WAIVERS: Time is of the essence in this deed
but no failure to exercise, and no delay in exercising, a right by a
party will operate as a waiver of that right, nor will a single or
partial exercise of a right preclude another or further exercise of
that right or the exercise of another right. No waiver by a party of
its rights under this deed will be effective unless it is in writing
signed by that party.
7. FURTHER ASSURANCES
The parties will sign, execute and do all deeds, schedules, acts, documents
and things as may reasonably be required by any other party, effectively to
carry out and give effect to the terms and intentions of this deed.
<PAGE>
-8-
8. NOTICES
8.1 FORM OF NOTICE: Any notice or other communication to be made or
delivered to any party under this deed is to be:
(a) in writing;
(b) signed by a person authorised by the sender; and
(c) sent by facsimile, personal delivery or post to the facsimile
number or address, and marked for the attention of the person
or office holder (if any), from time to time designated by that
party to the other parties for the purposes of this deed.
The initial facsimile number, address and relevant person or office
holder of each party is set out under its name at the end of the
Agreement for Sale and Purchase.
8.2 NOTICE EFFECTIVE: No communication is to be effective until received.
A communication will, however, be deemed to be received by the
addressee:
(a) in the case of a facsimile, on the Business Day on which it is
despatched or, if despatched after 5:00 p.m. (in the place of
receipt) on a Business Day or, if despatched on a non-Business
Day, on the next Business Day after the date of dispatch, in
each case evidenced by the receipt of a transmission report
from the machine on which the facsimile was transmitted;
(b) in the case of personal delivery, when delivered;
(c) in the case of a letter, if posted to an overseas address, on
the third Business Day after posting by airmail, and if posted
to a postal address in New Zealand, on the first Business Day
after posting by fastpost; and
(d) in the case of a communication to the Purchaser or Guarantor
where the Purchaser or Guarantor comprises two or more persons,
by receipt or deemed receipt by any one or more of such
persons.
9. COUNTERPARTS
This deed may be executed in two or more counterparts (including facsimile
copies) each of which will be deemed an original, but all of which together
<PAGE>
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will constitute one and the same instrument. A party may enter into this
deed by executing any counterpart.
10. GOVERNING LAW
10.1 NEW ZEALAND LAW: This deed is to be governed by and construed in
accordance with the laws of New Zealand.
10.2 SUBMISSION TO JURISDICTION: Each of the parties irrevocably and
unconditionally agrees that the Courts of New Zealand have non-
exclusive jurisdiction to hear and determine every matter that may
arise out of or in connection with this deed.
10.3 WAIVER OF IMMUNITY: The Crown, to the maximum extent permissible by
law, irrevocably waives any rights to claim sovereign or other
immunity from suit or action or process in respect of this Deed
and/or its subject matter.
<PAGE>
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In witness of which this deed has been executed.
SIGNED on behalf of )
HER MAJESTY THE QUEEN )
IN RIGHT OF NEW ZEALAND )
acting through her Minister of )
Finance BILL ENGLISH )
in the presence of: )
_______________________________ Signature of Witness
_______________________________ Occupation
_______________________________ Address
Address: Commercial and Financial Branch, The Treasury, 1 the
Terrace, Wellington
Facsimile No.: 499 0437
Attention: Branch Manager
SIGNED on behalf of )
HER MAJESTY THE QUEEN )
IN RIGHT OF NEW ZEALAND )
acting through her Minister for )
Responsible For Contact Energy )
Limited A. LOCKWOOD SMITH )
in the presence of: )
_______________________________ Signature of Witness
_______________________________ Occupation
_______________________________ Address
Address: Commercial and Financial Branch, The Treasury, 1 the
Terrace, Wellington
Facsimile No.: 499 0437
Attention: Branch Manager
<PAGE>
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SIGNED as a deed by )
EDISON MISSION ENERGY ) ______________________________
TAUPO LIMITED in the ) Authorised Signatory
presence of: )
)
) ______________________________
) Authorised Signatory
Witness:
____________________________________
Signature of witness
____________________________________
Full name of witness
____________________________________
Occupation of witness
____________________________________
Address of witness
SIGNED as a deed by )
EDISON MISSION ENERGY ) ______________________________
in the presence of: ) Authorised Signatory
)
)
) ______________________________
) Authorised Signatory
Witness:
____________________________________
Signature of witness
____________________________________
Full name of witness
____________________________________
Occupation of witness
____________________________________
Address of witness
SCHEDULE
BIDDING RULES
[To be attached.]
<PAGE>
SCHEDULE 4
BIDDING RULES
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BIDDING RULES
FOR THE SALE OF 40 PER CENT
OF THE SHARES IN
CONTACT ENERGY LIMITED
ISSUED BY
HER MAJESTY THE QUEEN IN
RIGHT OF NEW ZEALAND
ADVISED BY
ABN AMRO ROTHSCHILD
January 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
1. Offer for Sale and summary of Bidding Rules.......................... 1
2. Indicative Bids...................................................... 3
3. Final Bid Process.................................................... 5
4. Initial Public Offering.............................................. 8
5. General.............................................................. 9
ENCLOSURES
I. Indicative Timetable
II. Letter of Application
III. Form of Bid Bond
These Bidding Rules have been distributed and should be read in conjunction
with an Information Memorandum in relation to Contact Energy Limited
compiled by ABN AMRO Rothschild and dated January 1999 and the covering
letter sent by ABN AMRO Rothschild dated 15 January 1999. Particular
attention with respect to the sale process is drawn to paragraphs 1.5 and 15
in the Information Memorandum as these Bidding Rules are not intended to be
definitive as to every aspect of the sale process.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
"ABN AMRO ROTHSCHILD" means the Equity Capital Markets joint venture of the
Rothschild and ABN AMRO Groups, which has been appointed to advise the Crown
on the sale of its shareholding in Contact.
"AWARDEE" means the successful Bidder.
"BID" means the unilateral and irrevocable offer of the Bidder to acquire
the Shareholding made pursuant to and in accordance with these Bidding
Rules.
"BID BOND" means the bond required to be submitted by each Bidder in
accordance with and as further described in section 3.6.
"BIDDER" means the persons referred to in section 1.3 and any parties named
as purchaser or guarantor under the Sale and Purchase Agreement in that
document as submitted on the Final Bid Date in accordance with section
3.6(a).
"BIDDING GROUP" means a group of investors that jointly participates in the
Final Bid Process as a single Bidder.
"BIDDING RULES" means these rules as approved by the Crown, as these may be
amended, supplemented or clarified in accordance with section 5.1.
"CONTACT" means Contact Energy Limited, a state enterprise within the
meaning ascribed to that term by the State-Owned Enterprises Act 1986.
"CD-ROMS" means the CD-Roms containing information relevant to Contact that
will be provided to Bidders who are invited to participate in the Final Bid
Process.
"CROWN" means Her Majesty the Queen in right of New Zealand acting through
and by her Minister of Finance and her Minister for State-Owned Enterprises.
"DATA ROOM" means the data room or rooms each containing documents and other
information relevant to Contact which will be open to Bidders who are
invited to participate in the Final Bid Process.
"FINAL BID PROCESS" means the process involving the submission of final Bids
by the small number of Bidders and as outlined in Section 3.
"GOVERNING LAWS" means the laws of New Zealand.
"INFORMATION MEMORANDUM" means the information memorandum issued by the
Crown in relation to the sale of the Shareholding dated January 1999.
"IPO" means initial public offering within the meaning generally ascribed to
that term by the financial services industry.
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<PAGE>
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- --------------------------------------------------------------------------------
"OFFERING DOCUMENTS" means the prospectus, investment statement and Rule
144A documentation pursuant to which shares in Contact are to be offered for
sale by the Crown in an IPO.
"SALE AND PURCHASE AGREEMENT" means the agreement to be executed by the
Crown and the Awardee setting forth the terms upon which the Awardee shall
acquire the Shareholding.
"SECTION" refers to a section of these Bidding Rules.
"SHAREHOLDING" in relation to Contact, means the 40 per cent of the ordinary
shares of Contact being offered for sale by the Crown pursuant to the
process outlined in these Bidding Rules.
"STANDSTILL AGREEMENT" means the agreement between the Awardee and the Crown
whereby for a specified period the Awardee will agree:
(i) not to sell or dispose of the Shareholding; and
(ii) not to acquire an interest in any other securities of Contact.
"VERIFICATION CERTIFICATE" means the certificate in the form attached as
Attachment IV.
References to "party" or "interested party" are references to persons who
may become Bidders whether alone or as a member of a Bidding Group.
- --------------------------------------------------------------------------------
<PAGE>
BIDDING RULES
l. OFFER FOR SALE AND SUMMARY OF BIDDING RULES
1.1 The Crown is offering to sell the Shareholding by international
tender. This sale will be made in conjunction with an IPO of
Contact by which the Crown proposes to dispose of the balance of
its shareholding in Contact. Following the IPO, it is intended that
the ordinary shares of Contact offered for sale in the IPO will be
listed on the New Zealand Stock Exchange, and possibly also on the
Australian Stock Exchange.
1.2 The sale process for the Shareholding will be governed by these
Bidding Rules, as may be amended as outlined in section 5, and by
the Governing Laws. Parties should note that amendments and any
changes to the process will be notified through the website
established by ABN AMRO Rothschild. The website should be regularly
checked as interested parties will be deemed to have notice of any
amendments or changes placed on the website.
1.3 The sale process for the Shareholding will be a two-stage process:
(i) interested parties who have received a copy of the Information
Memorandum must submit indicative non-binding bids and meet
the other requirements set out in Section 2;
(ii) the Crown will then select from those parties who have
submitted indicative non-binding bids and met the other
requirements set out in section 2, a small number of parties
who will be invited to undertake due diligence and participate
in the Final Bid Process (each such party, inter alia,
constituting a "Bidder"), as outlined in section 3.
1.4 An indicative timetable outlining the key milestone dates (which as
noted may be subject to change) is annexed as Attachment l.
Interested parties and Bidders must adhere strictly to the
timetable.
1.5 By submitting indicative non-binding bids parties will be agreeing
to be bound by these Bidding Rules.
1.6 Parties should note that:
(i) aside from entering into the Sale and Purchase Agreement, the
Awardee will be expected to enter into the Standstill
Agreement (signed by all members of a Bidding Group where
relevant);
(ii) the sale of the Shareholding will be conditional upon the IPO
of Contact being successfully concluded; and
<PAGE>
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(iii) Bidders will be expected to provide certain information to
the Crown as part of the Contact IPO process and, if
successful, will be expected to indemnify the Crown,
Contact and its directors in relation to errors, omissions
and mis-statements relating to that information.
<PAGE>
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2. INDICATIVE BIDS
2.1 Interested parties wishing to participate in the Final Bid Process
should submit an indicative non-binding bid (in the form annexed as
Attachment II), together with the other information outlined in
section 2.3.
2.2 The indicative price should be a specified price rather than being
expressed as a range of prices.
2.3 The Crown wishes interested parties to provide documentary evidence of
the following matters:
(i) existing ownership or significant operational experience in the
energy sector (parties intending to bid as a Bidding Group
should ensure that at least one member can meet this
requirement);
(ii) how their Bid will contribute to the success of the Contact IPO
(parties should include a brief indicative outline of their
broad intentions relating to Contact and indicate any
significant differences in strategic vision to that outlined by
Contact in the Information Memorandum);
(iii) their capacity to complete the process in the time required,
including financial capacity to fund the likely cost of the
Shareholding (details of financial accounts and any credit
ratings should be provided where appropriate);
(iv) clearance or authorisation granted under the Commerce Act 1986
or an explanation satisfactory to the Crown as to why
application for such is not necessary or evidence that they
have submitted an application for Commerce Commission clearance
that was registered by the Commerce Commission on or before 3
February 1999 (note: where a party or parties may directly or
indirectly have any local operations in the New Zealand energy
sector, the Crown will expect such party to seek and obtain
clearance or authorisation);
(v) that application for consent from the Overseas Investment
Commission has been made;
(vi) that any other regulatory consents required in New Zealand or
elsewhere have been obtained; and
(vii) evidence that a relevant senior employee representative of the
Bidder has the requisite corporate authority to investigate and
negotiate a purchase of the Shareholding.
<PAGE>
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2.4 Indicative non-binding bids, together with the other information
required as per section 2.3, should be delivered in a sealed envelope
to the offices of ABN AMRO Rothschild at Level 11, Castrol House, 36
Customhouse Quay, Wellington no later than 5:00pm on 3 February 1999,
New Zealand time. Any late indicative bids will not be accepted.
<PAGE>
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3. FINAL BID PROCESS
3.1 A small number of interested parties who have complied with section 2
will be invited to participate in the Final Bid Process, provided
that in respect of any interested party who had applied for, and the
Commerce Commission had registered, on or before 3 February 1999, an
application for Commerce Commission clearance, if the Commerce
Commission does not grant them clearance by 12 February 1999, their
involvement in the Final Bid Process, including, without limiting the
generality of the foregoing, the due diligence review referred to in
section 2, shall cease forthwith.
3.2 Bidders will be permitted to undertake a due diligence review of
Contact in accordance with the procedures outlined by ABN AMRO
Rothschild on behalf of the Crown.
3.3 Bidders will be given the opportunity to comment on drafts of the
Sale and Purchase Agreement and Standstill Agreement prior to the
deadline for submission of final Bids. Drafts will be provided on 5
February 1999. These documents will be able to be accessed through
the website established by ABN AMRO Rothschild. Bidders' comments
must be provided to the Crown, through ABN AMRO Rothschild, no later
than 22 February 1999. The Crown, in its sole discretion, may accept
or reject any comments. Final versions of these documents will be
provided to Bidders on 5 March 1999. No further changes to these
documents will be accepted.
3.4 Reference to Bidders' involvement in relation to the IPO process is
outlined in section 4.
3.4A All Bidders will be required to submit the identity and details of
the proposed purchaser entity to ABN AMRO Rothschild no later than 22
February 1999. Purchaser entities which are not the shortlisted
Bidder notified by ABN AMRO Rothschild will be required to provide an
acceptable Guarantor of their obligations under the Sale and Purchase
Agreement. Parties intending to bid as a Bidding Group should note
that they will be required to advise ABN AMRO Rothschild of the
proposed consortium no later than 22 February 1999, and to submit to
ABN AMRO Rothschild on that date the following information:
(i) details and the identity of the consortium members and all
relevant arrangements among them;
(ii) details and the identity of the proposed purchaser entity.
The shortlisted Bidder, directly or through a wholly owned subsidiary
will be required to own at least an effective 75% equity interest in
the relevant
<PAGE>
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Bidding Group and will be required to guarantee the obligations of
the Bidding Group.
3.5 Each final Bid for a Shareholding must be expressed to be an
irrevocable and unconditional offer (executed as a deed) capable of
acceptance within 21 days and must be delivered, in a sealed
envelope, together with the documents referred to in section 3.6, to
the offices of ABN AMRO Rothschild at Level 11, Castrol House, 36
Customhouse Quay, Wellington by 5:00pm on 20 March 1999, New Zealand
time. Any late Bids will not be accepted.
3.6 The following documents or information must accompany final Bids:
(i) the Sale and Purchase Agreement (including the purchase price
for the Shareholding) and Standstill Agreement duly executed by
the Bidder (signed by all members of the Bidding Group, where
relevant);
(ii) a Bid Bond in the amount of NZ$25 million (in the form annexed
as Attachment III) from an internationally recognised bank with
a credit rating for long term debt of AA- or better, as issued
by Standard & Poors (or a comparable credit rating issued by
another internationally recognised rating agency);
(iii) the Verification Certificate, duly executed by a senior
representative of the Bidder, for and on behalf of the Bidder;
(iv) evidence of due execution of all documents and of all
corporate, regulatory, governmental and other consents; and
(v) where the Bidder is a Bidding Group, executed copies of all
agreements, arrangements and understandings between the
members.
3.7 The Sale and Purchase Agreement will be expressed to be conditional
upon successful completion of the Contact IPO, such condition to be
satisfied no later than 29 October 1999.
3.8 The Bid Bond must secure a Bidder's obligations under these Bidding
Rules, the Bid of the Bidder and the Sale and Purchase Agreement. The
Bid Bond will be returned to the Bidder (undrawn and uncalled): (a)
where the Bidder is the Awardee, in accordance with clause 4.1 of the
Sale and Purchase Agreement; or (b) where the Bidder is not the
Awardee, upon the Crown receiving a letter or letters of credit in
accordance with clause 4.1 of the Sale and Purchase Agreement entered
into with the Awardee.
3.9 The successful Bidder, on being so notified by the Crown, shall be
required to lodge, or procure the lodgement of, within 7 days
thereafter, an
<PAGE>
-7-
irrevocable letter or letters of credit, in favour of the Crown,
issued by an internationally recognised bank or banks having a credit
rating for long term debt of AA- or better, as issued by Standard &
Poors (or a comparable credit rating issued by another
internationally recognised rating agency), for (in aggregate) the
full purchase price of the Shareholding as recorded in the Sale and
Purchase Agreement between the Crown and the Bidder.
3.10 The Crown has sole and complete discretion to accept or reject any or
all Bids of any or all Bidders, to cancel the sale process and to run
the process generally as it deems fit.
3.11 The Crown reserves the right to consider any factor when determining
the successful Bid and to deal with any Bidder individually or
simultaneously with others, or to revert back to other Bidders.
3.12 The Crown shall have no obligation to accept any Bid whether or not
such Bid represents the best and/or highest offer for the
Shareholding.
3.13 Without limiting the generality of sections 3.10 to 3.13, once
parties have been short-listed to participate in the Final Bid
Process, the Crown's decision as to the successful Bid is likely to
be determined primarily on price.
<PAGE>
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4. INITIAL PUBLIC OFFERING
4.1 Submission of a Bid by a Bidder will constitute acknowledgement that
the Crown proposes to sell the balance of the issued share capital in
Contact (being 60% of the capital of Contact) through an IPO to be
conducted in conjunction with the sale of the Shareholding. The IPO
will:
(a) be managed and organised by ABN AMRO Rothschild;
(b) will consist of a public offer in New Zealand and a private
institutional offer in the United States of America and
elsewhere;
(c) will result in the shares in Contact being listed on both the
New Zealand Stock Exchange and possibly the Australian Stock
Exchange.
4.2 Copies of the Offering Documents will be made available to Bidders on
or about 18 February 1999. Bidders will not be expected to make
extensive comments on the Offering Documents but will be expected to
provide the information outlined in section 4.4 for inclusion,
assuming they are successful, and indicate any differences in
strategic vision in relation to Contact from that outlined in the
Offering Documents.
4.3 The Crown will appoint three nominees of the Awardee to the Board of
Contact immediately prior to settlement of the Sale and Purchase
Agreement (which is to occur on completion of the IPO just prior to
stock exchange listing). The Crown does not wish to know the identity
of the nominees until just prior to settlement.
4.4 Each Bidder will be asked to provide a profile and information
relating to its operations and other relevant information for
inclusion in the Offering Documents, (assuming it is the successful
Bidder). Such information shall be provided by Bidders to the Crown
by 13 February 1999. Further comments in relation to any differences
in strategic vision and any other comments are to be provided by
Bidders no later than 23 February 1999. Bidders will also need to
supply a Verification Certificate confirming their provision of, and
agreement to use of, and confirmation of, the information and
extracts specified in that certificate, which information and
extracts are to be included in the Offering Documents substantially
in the form in which it appears in the Verification Certificate.
4.5 Bidders should note that the Sale and Purchase Agreement will contain
covenants whereby the Awardee will provide an indemnity in favour of
the Crown, Contact and its directors for errors, omissions and
misstatements in relation to the information provided and
confirmations made pursuant to section 4.4 and referred to in the
Verification Certificate.
<PAGE>
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5. GENERAL
5.1 The Crown reserves the right at any time, in its sole discretion, to
revoke, modify, amend or terminate any of these Bidding Rules or the
indicative timetable without prior notification or justification. Any
such changes will be notified to parties through the website
established by ABN AMRO Rothschild. Parties should regularly check
the website as placement of information thereon will be deemed to be
notice of any change to these Bidding Rules.
5.2 These Bidding Rules shall be governed and construed in accordance
with the Governing Laws and all parties submit to the non-exclusive
jurisdiction of the New Zealand courts.
<PAGE>
ATTACHMENT I
INDICATIVE TIMETABLE
1999
15 January Information Memorandum and Bidding Rules
3 February Indicative non-binding bids and supporting information due
5 February Short-listed Bidders notified of admission in Final Bid
Process
Due diligence commences: CD-Roms provided to Bidders (and
access to Data Room)
Forms of Sale and Purchase Agreement and Standstill
Agreement made available to Bidders
13 February Bidder's profile for Offering Documents due
22 February Draft IPO Offering Documents made available to Bidders
22 February Bidder's comments on Sale and Purchase Agreement and
Standstill Agreement due and the final date for Bidders to
advise details and identity of intending Bidding Groups and
any relevant proposed arrangements, and the final date for
Bidders to advise details and identity of intending
purchaser entities.
24 February New Zealand prospectus made available to Bidders.
26 February Bidder's comments on strategic vision for Contact and any
other comments on Offering Documents due
5 March Final versions of Sale and Purchase Agreement and
Standstill Agreement provided to Bidders
12 March Last day for any final due diligence queries
20 March Submission of final binding Bids due
Week beginning Crown approves selected Bidder
22 March
<PAGE>
ATTACHMENT II
FORM OF INDICATIVE NON-BINDING BID LETTER
(on Bidder's letterhead)
[date]
ABN AMRO Rothschild
Level 11, Castrol House
36 Customhouse Quay
Wellington
NEW ZEALAND
For: Peter Bird/Liz Kelly
Contact Energy Limited
We wish to conduct due diligence investigations and discussions with the
management of Contact Energy Limited ("Contact") with a view to submitting a
final bid for the purchase of 40 per cent of the issued shares in Contact
("Shareholding") from the Crown. Based on our investigations to date, we believe
we would be prepared to acquire the Shareholding for a total price of
NZ$[ ]. This is an indicative non-binding bid.
We agree/our Bidding Group agrees to be bound by the Bidding Rules for the sale
of the Shareholding dated January 1999.
This letter is solely an indication of interest and a request to be admitted
into the Final Bid Process. It does not constitute an offer or commitment on our
part to submit a final bid at a future time, and, except for agreeing to be
bound by the Bidding Rules, is not intended to have any legal effect.
Attached is the additional information requested per section 2.3 of the Bidding
Rules.
Yours faithfully
___________________________
(Title)
<PAGE>
ATTACHMENT III
FORM OF BID BOND
______________________________________________________________________ of
______________________________ (the "Bidder") has submitted a final bid to
purchase 40 per cent of the shares in Contact Energy Limited ("Contact") (the
"Shareholding").
In terms of the bidding rules issued by Her Majesty the Queen in right of New
Zealand (the "Crown") for the sale of the Shareholding dated January 1999 (the
"Bidding Rules") the Bidder is bound and obliged to furnish a Bid Bond along
with the final bid to secure certain obligations of the Bidder as set out
therein ("Obligations");
At the request of the Bidder, we _____________________________________ of
____________________ having our registered office at ___________________________
have agreed to give such a Bid Bond.
WE HEREBY irrevocably undertake and are bound and obliged to pay to the Crown
unconditionally and upon demand any sum or sums up to a maximum amount of NZ$25
million.
Every demand under this Bid Bond shall be in writing and signed by the New
Zealand Minister of Finance (or by any person acting under a delegated authority
from him) and shall be accompanied by a statement to the effect that the Bidder
has failed and/or neglected to perform its Obligations. For all purposes
connected with and relating to this Bid Bond, every demand shall be conclusive
proof that the amount so demanded is lawfully due under this Bid Bond and we
shall make payment without reference to the Bidder and notwithstanding any
notice given by the Bidder not to pay the same.
All payments under this Bid Bond shall be made in New Zealand by bank cheque or
bank draft drawn in favour of the Crown and in New Zealand dollars.
This Bid Bond shall remain valid and binding on us and shall continue until the
date on which the Crown advises us in writing that this Bid Bond is no longer
required by it or 31 October 1999 (whichever the earlier) PROVIDED HOWEVER that
we may, at any time, without being required to do so, pay to the Crown the said
sum of NZ$25 million less any amount or amounts we may have previously paid
under this Bid Bond or such lesser sum as may be specified by the Crown and
thereupon our liability under this Bid Bond shall terminate.
This Bid Bond shall be governed by the laws of New Zealand and we submit to the
nonexclusive jurisdiction of the New Zealand courts.
Dated this _____ day of _____________ 1999.
[executed and witnessed as a deed]
<PAGE>
ATTACHMENT IV
VERIFICATION CERTIFICATE
TO: The Members of the Contact Energy Limited Due Diligence Committee
Contact Energy Limited
Directors of Contact Energy Limited
The Crown
I confirm that:
1. I have prepared the profile (and any additional information) attached to
this certificate (the "extract") and I have read the section on Contact's
strategic vision (also attached) from the draft dated [ ] 1999 of
the Contact Energy Limited Prospectus (the "strategy section");
2. The statements contained in the extract are true and not misleading and I
also confirm that [the Purchaser has no/neither the Purchaser nor the
Guarantor has any] significant differences in strategic vision for Contact
Energy Limited to that outlined by Contact Energy Limited in the strategy
section.
3. No matters have been omitted from the extract or from our confirmation on
the strategy section which would make any of the statements contained in
the extract, or the strategy section, untrue or misleading in the context
of the international and Australasian public offering of 60% of the Shares
in Contact Energy Limited.
4. The extract may be used in any offering documents relating to the
international and Australasian public offering of 60% of the Shares in
Contact Energy Limited to be published on or around April 1999.
5. Where possible, I have attached references to independent external material
which support each of the statements contained in the extract.
6. I acknowledge that the parties listed above will rely on this certificate,
which I give for and on behalf of [the Purchaser[and the Guarantor]].
Bidder's Name: ____________________________
Duly Authorised Signatory: ____________________________
Full Name of Signatory: ____________________________
Senior Position Held: ____________________________
Date: ____________________________
<PAGE>
SCHEDULE 5
CAPITAL EXPENDITURE PROJECTIONS
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
Geothermal (1)
Steam Winning ($000s) 2.09 3.84 2.65 0.92
Reinjection ($000s) 9.11
Station Misc ($000s) 0.50 0.75 0.75 0.75 0.75 0.75 0.75
RMA Reconsent 0.84 0.84 ---- Costs associated with preparing and progressing RMA consents
Total Geothermal 3.43 1.59 4.59 0.75 3.40 0.75 10.78
Thermal
Otahuhu B 57.60 1.03 ---- Assumes all retensions are released if dispute is resolved
Te Rapa 38.40 ---- Full payment under Te Rapa EPC
Total Thermal 96.00 1.03 0.00 0.00 0.00 0.00 0.00
Hydro (2)
Stator Repairs 3.13 3.22
Stator Coolers 0.13 0.13 0.27 0.27 ---- Upgrade stator cooling in order to prolong life
Transformers 0.37 3.85 0.83 ---- Enhancement/replacement of transformers
Elec/Mech 1.24
Sluice 0.23 1.23 ---- Refurbishment of sluice gates
Gantry 3.00 ---- Undertake remedial work in order to enhance dam safety
Clutha Reconsents 1.20 1.70 ---- Costs associated with preparing and progressing RMA consents
Clyde Division Sluice Gates 2.00 2.00 ---- Cost of new division sluice gates
Total Hydro 4.43 4.93 2.50 3.98 4.23 0.27 4.46
Total Generation 103.86 7.55 7.09 4.73 7.63 1.02 15.24
Otahuhu B major maintenance 17.42 12.54
Retail Acquisitions
Fixed Assets 5.50 ---- Retail acquisitions undertaken between 1 October 1998 and 31 March 1999
Goodwill 172.02 ---- Retail acquisitions undertaken between 1 October 1998 and 31 March 1999
Meters 58.86 ---- Retail acquisitions undertaken between 1 October 1998 and 31 March 1999
Ongoing Meters 1.50 2.00 2.00 2.00 2.00 2.00 2.00
Total Retail 237.88 2.00 2.00 2.00 2.00 2.00 2.00
Other Capex 1.00 0.50 0.50 0.50 0.50 0.50 0.50
Total Capital Expenditure 342.74 10.05 9.59 7.23 10.13 3.52 17.74
Investment Expenditure 7.00 ---- Equity contribution for Oakey
<CAPTION>
2006 2007 2008 2009 2010
<S> <C> <C> <C> <C> <C>
Geothermal (1)
Steam Winning ($000s) 2.21 3.02 ---- New drilling activities to secure new steam supplies (does not include
deep drilling at Obaaki)
Reinjection ($000s) 2.78 ---- Full reinjection of separated liquid may be a new requirement for RMA consents
Station Misc ($000s) 0.75 0.75 0.75 ---- Unspecified on-going capital expenditure
RMA Reconsent
Total Geothermal 3.53 2.96 3.77 0.00 0.00
Thermal
Otahuhu B
Te Rapa
Total Thermal 0.00 0.00 0.00 0.00 0.00
Hydro (2)
Stator Repairs 3.27 3.32 3.37 3.42 3.47 ---- Assumes old stators replaced with new
Stator Coolers
Transformers
Elec/Mech 1.2 1.23 1.25 1.35 1.5 ---- Enhancement/replacement of transformers
Sluice
Gantry
Clutha Reconsents
Clyde Division Sluice Gates
Total Hydro 4.47 4.55 4.62 4.77 4.97
Total Generation 8.00 7.51 8.39 4.77 4.97
Otahuhu B major maintenance 17.39 ---- Cost of major plant maintenance as per O&M agreement with EPC contractor
Retail Acquisitions
Fixed Assets
Goodwill
Meters
Ongoing Meters 2.00 2.00 2.00 2.00 2.00 ---- Initial estimate for meter replacement
Total Retail 2.00 2.00 2.00 2.00 2.00
Other Capex 0.50 0.50 0.50 0.50 0.50 ---- Unspecified ongoing capital expenditure
Total Capital Expenditure 10.50 10.01 10.89 7.27 7.47
Investment Expenditure
</TABLE>
(1) In the event more onerous consent conditions are imposed with reconsenting
Wairakei, management expects there may be future capital expenditure which
has not yet been assessed.
(2) There may also be future capital expenditure required to monitor the
Roxburgh land slide. Again, no estimates are available and preliminary
investigations indicate minimal movement of the slide.
<PAGE>
SCHEDULE 6
1. Purchaser: EDISON MISSION ENERGY TAUPO LIMITED
2. Guarantor: EDISON MISSION ENERGY
3. Purchase Price: NZ$ 1,208,000,000.00
(ONE BILLION, TWO HUNDRED AND EIGHT MILLION NEW ZEALAND DOLLARS)
4. Notice Details:
Purchaser Address for Service: Bell Gully Buddle Weir
IBM Centre
171 Featherston St.
PO Box 1291
Wellington
Purchaser Facsimile: 0065 836 0879
Guarantor Address For Service: Bell Gully Buddle Weir
IBM Centre
171 Featherston St.
PO Box 1291
Wellington
Guarantor Facsimile: 0065 836 0879
5. Purchaser's and Guarantor's Agent For Service in New Zealand:
Name: Bell Gully Buddle Weir
Address: IBM Centre
171 Featherston St.
PO Box 1291
Wellington
6. Date and party to Confidentiality Deed:
Party: Edison Mission Energy Holdings Pty Ltd
Date: 14 January 1999
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Michael Kelland, of Singapore, Business Development Director, certify
that:
1. BY deed dated the 19th day of March 1999, Edison Mission Energy Taupo
Limited a company duly incorporated in New Zealand (the "grantor"),
appointed me its attorney on the terms and subject to the conditions
set out in the said deed;
2. AT the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from the
register or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 24th day of March 1999
/s/ MICHAEL KELLAND
-------------------------
Michael Kelland
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Michael Kelland, of Singapore, Business Development Director, certify
that:
1. BY deed dated the 17th day of March 1999, Edison Mission Energy a
company duly incorporated in the United States of America (the
"grantor"), appointed me its attorney on the terms and subject to the
conditions set out in the said deed;
2. AT the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from the
register or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 24th day of March 1999
/s/ MICHAEL KELLAND
-------------------------
Michael Kelland
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Gerard Loughman, of California, United States of America, Company
Director, I certify that:
1. BY deed dated the 19th day of March 1999, Edison Mission Energy Taupo
Limited a company duly incorporated in New Zealand (the "grantor"),
appointed me its attorney on the terms and subject to the conditions
set out in the said deed;
2. AT the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from the
register or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 24th day of March 1999
/s/ GERARD LOUGHMAN
-------------------------
Gerard Loughman
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Gerard Loughman, of California, United States of America, Company
Director, certify that:
1. BY deed dated the 17th day of March 1999, Edison Mission Energy a
company duly incorporated in the United States of America (the
"grantor"), appointed me its attorney on the terms and subject to the
conditions set out in the said deed;
2. AT the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from the
register or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 24th day of March 1999
/s/ GERARD LOUGHMAN
-------------------------
Gerard Loughman
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Michael Kelland, of Singapore, Business Development Director, certify
that:
1. by deed dated the 19th day of March 1999, Edison Mission Energy Taupo
Limited, a company duly incorporated in New Zealand (the "grantor"),
appointed me its attorney on the terms and subject to the conditions
set out in the said deed;
2. at the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from
the register or otherwise; and
3. I have executed the attached document in the name of the grantor in
my capacity as its attorney under the powers conferred by the said
deed.
SIGNED at Wellington this 20th day of March 1999.
/s/ MICHAEL KELLAND
-------------------------
Michael Kelland
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Gerard Loughman, of California, United States of America, Company
Director, certify that:
1. by deed dated the 19th day of March 1999, Edison Mission Energy Taupo
Limited, a company duly incorporated in New Zealand (the "grantor"),
appointed me its attorney on the terms and subject to the conditions
set out in the said deed;
2. at the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the liquidation of the grantor, the removal of the grantor from the
register or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 20th day of March 1999.
/s/ GERARD LOUGHMAN
-------------------------
Gerard Loughman
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Michael Kelland, of Singapore, Business Development Director, certify
that:
1. by deed dated the 17th day of March 1999, Edison Mission Energy, a
company duly incorporated in the United States of America (the
"grantor"), appointed me its attorney on the terms and subject to the
conditions set out in the said deed;
2. at the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the dissolution of the grantor, or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 20th day of March 1999.
/s/ MICHAEL KELLAND
-------------------------
Michael Kelland
<PAGE>
CERTIFICATE OF NON-REVOCATION OF POWER OF ATTORNEY
I, Gerard Loughman, of California, United States of America, Company
Director, certify that:
1. by deed dated the 17th day of March 1999, Edison Mission Energy, a
company duly incorporated in the United States of America (the
"grantor"), appointed me its attorney on the terms and subject to the
conditions set out in the said deed;
2. at the date of this certificate I have not received any notice or
information of the revocation of that appointment by the commencement
of the dissolution of the grantor, or otherwise; and
3. I have executed the attached document in the name of the grantor in my
capacity as its attorney under the powers conferred by the said deed.
SIGNED at Wellington this 20th day of March 1999.
/s/ GERARD LOUGHMAN
-------------------------
Gerard Loughman
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EDISON
MISSION ENERGY AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 387,119
<SECURITIES> 0
<RECEIVABLES> 94,042
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 579,987
<PP&E> 4,921,468
<DEPRECIATION> 269,600
<TOTAL-ASSETS> 6,931,231
<CURRENT-LIABILITIES> 2,013,879
<BONDS> 2,575,715
150,000
0
<COMMON> 64,130
<OTHER-SE> 924,901
<TOTAL-LIABILITY-AND-EQUITY> 6,931,231
<SALES> 0
<TOTAL-REVENUES> 205,369
<CGS> 0
<TOTAL-COSTS> 94,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,752
<INCOME-PRETAX> 74,237
<INCOME-TAX> 16,301
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 13,840
<NET-INCOME> 44,096
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
