8.1 Offer Structure
The Loan Notes being offered under this Prospectus have been issued to the
Underwriters prior to the issue of this Prospectus. The Underwriters are selling
the Loan Notes issued to them to Investors under this Prospectus. Following
close of the Rights Offer, the Underwriters will transfer the Loan Notes to
Investors and Envestra will issue Shares to Investors (that will together form the
8.2 Other Financing Arrangements
In addition to the financing arrangements put in place to fund the Stratus
Business (which are described in Section 7.1.3), Envestra at the time of its 1997
initial public offering entered into two debt funding facilities – a $515 million
bank debt facility used to fund the acquisition of the Existing Network from Boral
and for capital expenditure and a $215 million issue of Capital Indexed Bonds.
Envestra’s $515 million bank debt facility comprises three tranches:
• a $345 million term debt facility drawn down to fund the acquisition of the
Existing Network and repayable in 2002;
• a $160 million term debt facility to fund capital expenditure which is
repayable in 2003; and
• a $10 million working capital facility repayable in 2003.
At the time the bank debt facility was established, Envestra entered into a series
of swap arrangements under which its interest expense on part of the principal
in respect of the facility was fixed:
• until 2001 - $200 million of the $345 million facility;
• until 2002 - $145 million of the $345 million facility; and
• until 2003 - $154 million of the $160 million facility.
The Capital Indexed Bonds comprised two series:
• $160 million series one bonds due for repayment in 2007; and
• $55 million series two bonds due for repayment in 2012.
The interest rate on the series one bonds has been fixed for ten years and the
interest rate on the series two bonds has been fixed for fifteen years.
The principal component of the bonds is indexed by the quarterly change in the
CPI (from their issue date). The principal component of the bonds is therefore
maintained in real terms. A coupon rate is payable on the amount of indexed
principal at each quarter end.
Envestra’s obligations under the bank debt facility, the Capital Indexed Bonds and
the swaps are guaranteed by three of its subsidiaries, Ayers Net Limited, Beta
Net Limited and Gamma Net Limited. Together Envestra and those three
subsidiaries own the Existing Network assets. All four companies have provided
fixed and floating charges over all their present and future assets to secure their
respective obligations under (in the case of the subsidiaries) their guarantee or
(in the case of Envestra) the bank debt facility, the Capital Indexed Bonds and the
8.3 Continuous Disclosure Statement
Envestra is listed on ASX and, as required by the Corporations Law, is subject to
the continuous disclosure requirements of the ASX Listing Rules. In addition,
Envestra is subject to the periodic reporting requirements of the Corporations
Law, including annual reports and half yearly reports which are distributed to
Security Holders. As such, there is a large body of public information available to
investors and their professional advisers concerning Envestra. This information
can be obtained by reviewing the files on Envestra available at ASX or inspected
at an office of ASIC or at the Company’s website at www.envestra.com.au
Envestra will provide to any person upon request prior to the close of the Offer,
free of charge, a copy of any or all of the following documents:
• Envestra’s annual report for the year ended 30 June 1998;
• Envestra’s announcement of its interim results for the six months to
31 December 1998; and
• any other documents lodged with ASX since the date of lodgment of the
annual report for the year ended 30 June 1998 and ending before the issue of
this Prospectus, as follows:
16 July 1999 Envestra to raise $310 million of new capital through the
Rights Offer, Convertible Notes issue and Placement
6 July 1999 Amendments to Loan Note Trust Deed approved
28 May 1999 Standard & Poor’s credit rating for EnVic and Envestra
24 May 1999 Envestra presently considering a number of options in
respect of its proposed $308 million capital raising
4 May 1999 Half Yearly Report to Security Holders for the six month
period to 31 December 1998
22 April 1999 Envestra announces distribution to Security Holders of
3.26 cents per Security for the six months ended
31 March 1999
31 March 1999 Letter to Security Holders advising of the settlement of
the acquisition of the Stratus Business
26 March 1999 ASX Year 2000 disclosure
16 March 1999 Analysts presentation on the acquisition of the Stratus
13 March 1999 Envestra and Boral successful joint bidders for the Stratus
distribution business and the Energy 21 retail business
10 March 1999 Contracts let for the Mildura natural gas project
9 March 1999 Half Yearly Accounts for the six month period to
31 December 1998
8 March 1999 Listing Rule Waiver modified to extend Listing Rule 7.11.3
relief until 31 August 1999
1 March 1999 Access Arrangement for South Australian gas distribution
networks lodged with Regulator
3 February 1999 $30 million gas project for Wide Bay region of Queensland
22 January 1999 Envestra completes purchase of Palm Valley transmission
pipeline in the Northern Territory
10 December 1998 Change to mailing address
5 November 1998 Minor adjustment in interest/principal components of
distribution for six months to 30 September 1998 (total
26 October 1998 Chairman’s address to Security Holders
20 October 1998 Envestra to acquire Palm Valley transmission pipeline in
the Northern Territory from Holyman Limited
19 October 1998 Envestra announces distribution to Security Holders of
4.89 cents per Security for the six months ended
30 September 1998
15 October 1998 Section 235 notice - Director’s interests
28 September 1998 1998 Annual Report together with Notice of Annual
8.4 Documents Available for Inspection
Copies of the following documents may be inspected at the registered office of
Envestra at Level 10, 81 Flinders Street, Adelaide, during normal office hours free
of charge for twelve months after lodgement of this Prospectus:
• material contracts referred to in Section 7 above and, in the case of a material
contract that is not reduced to writing, a memorandum giving full particulars
of the contract; and
• consents to the issue of this Prospectus.
8.5 Interests of Directors
The interests of Directors requiring disclosure under section 1021(6) of the
Corporations Law are included in this Section.
Directors are not required to hold any Securities in Envestra. Directors have the
following beneficial interests in Securities:
Mr Robert Piper (1)
Mr John Allpass 30,000
Mr Brian Sallis 30,000
Mr Grant King 51,000
Mr Michael Scobie 20,000
Mr Oliver Clark 100,000
1. Mr Piper also holds a non-beneficial interest as a trustee on behalf of unrelated deceased estates in 185,300
Some of the Directors are members of superannuation funds which hold
Securities. Directors may also acquire Securities under this Prospectus.
REMUNERATION OF NON-EXECUTIVE DIRECTORS
The constitution of Envestra provides that the non-executive Directors may be
paid as remuneration for their services an aggregate sum determined from time
to time by Envestra shareholders in a general meeting. The maximum amount
which may presently be paid is $400,000 per annum. The sum is to be divided
among the Directors in such proportion as the Directors agree.
If a Director performs extra services, Envestra may remunerate that Director by a
payment of a fixed sum determined by the Directors in addition to the
remuneration referred to above.
Directors will be paid travelling and other expenses properly incurred by them in
attending Directors’ and committee meetings or general meetings of Envestra or
otherwise in connection with the business of Envestra.
Directors have the benefit of a Deed of Access, Insurance and Indemnity granted
Mr John Allpass is a non-executive Director of Macquarie Bank Limited
("Macquarie"), a director of various subsidiaries of Macquarie and a consultant to
Macquarie. However, no Directors’ or other fees payable to Mr Allpass by
Macquarie or its subsidiaries are affected by the acquisition of the Stratus
Business, the issue of Securities under this Prospectus or the underwriting of the
Offer. Mr Allpass also owns shares in Macquarie. Macquarie has provided
financial advice to Envestra in relation to the acquisition of the Stratus Business
and the Placement (in relation to CKI) and Macquarie Equity Capital Markets
Limited (a wholly-owned subsidiary of Macquarie) has acted as an Underwriter
to the Rights Offer, placement to excluded offerees and the Convertible Note
issue. The underwriting agreement is summarised in Section 7.2 and the
Convertible Note underwriting agreement is summarised in Section 7.5.
Mr Grant King and Mr Michael Scobie are each executives of Boral. They will
continue to be executives of Boral and to be remunerated by Boral for their
services as executives.
Each of the Directors beneficially owns Boral shares.
It is common practice for Australian listed companies to provide some retirement
allowance for their non-executive Directors. This is permitted by Envestra’s
Each non-executive Director (other than Mr Grant King and Mr Michael Scobie)
has entered into a standard agreement dealing with retirement payments. This
agreement provides that the Director, upon retirement or on the Director’s death,
shall be paid an allowance calculated in accordance with the table set out below,
less any benefits which the Director is entitled to receive from a complying
superannuation fund by virtue of payments made to the fund by Envestra.
LENGTH OF SERVICE AS A NON-EXECUTIVE AMOUNT OF RETIREMENT ALLOWANCE
DIRECTOR OF ENVESTRA (EXCLUDING ANY
PERIOD SERVED ONLY AS AN ALTERNATE
Less than 1 year Nil
Between 1 year and 10 years The proportion of the amount payable at 10
years equal to the ratio that the period served
as a non-executive Director of Envestra bears
to 10 years.
10 or more years 3 times the average annual emoluments of the
Director over the 3 years before the retirement
8.6 Interests of Experts and Advisers
Except for the fees and amounts paid or agreed to be paid and the interests set
out below, no expert or firm in which any expert is a partner has any interests or
has been or agreed to be paid any amount which must be disclosed under
section 1021(6) of the Corporations Law.
Except for the advisory services or appointments disclosed below, each expert
states that neither it nor any of its directors, principals or employees is a director,
employee of, or professional adviser to, Envestra or, to the knowledge of the
expert, intends to be.
• PricewaterhouseCoopers Securities Limited has acted as Investigating
Accountant in relation to the Rights Offer, Placement and the Convertible Note
issue and has prepared the Investigating Accountant’s Report which is
contained in this Prospectus and PricewaterhouseCoopers has acted as
Auditor to Envestra (together “PwC”). PwC has also provided assistance to the
Directors of Envestra in conducting their due diligence. Envestra has paid or
agreed to pay PwC approximately $135,000 for those services to the date of
this Prospectus. Those fees are calculated according to PwC normal practices.
• Mallesons Stephen Jaques have acted as legal adviser to Envestra in relation
to the Rights Offer, Placement and the Convertible Note issue. Envestra has
paid or agreed to pay Mallesons Stephen Jaques approximately $600,000 for
those services to the date of this Prospectus. Those fees are calculated in
accordance with Mallesons Stephen Jaques’ normal practices.
8.7 Consents and Expenses of the Offer
CONSENTS TO BE NAMED
The following parties have given and have not, before the issue of this
Prospectus, withdrawn their written consent to be named in this Prospectus in
the form and context in which they are named:
• Perpetual Trustee Company Limited, as Loan Note Trustee and Trustee for the
• Mallesons Stephen Jaques, as Solicitors to the Offer;
• PricewaterhouseCoopers, as Auditors;
• Macquarie Equity Capital Markets and Warburg Dillon Read, as Underwriters;
• Perpetual Registrars Limited as Registrar.
CONSENTS TO BE NAMED AND TO THE INCLUSION OF INFORMATION
• PricewaterhouseCoopers has given and has not, before the issue of this
Prospectus, withdrawn its written consent to the issue of this Prospectus with
the inclusion of references to audited financial information of Envestra in the
form and context in which it is included.
• PricewaterhouseCoopers Securities Limited has given and has not, before the
issue of this Prospectus, withdrawn its written consent to the issue of this
Prospectus with the inclusion of the Independent Accountant’s Report and all
references to that report in this Prospectus in the form and context in which it
DISCLAIMERS OF RESPONSIBILITY
Each person named above in Section 8.7:
• has not authorised or caused the issue of this Prospectus;
• does not make, or purport to make, any statement in this Prospectus other
than, in the case of PricewaterhouseCoopers, a statement included in this
Prospectus with its consent; and
• to the maximum extent permitted by law, expressly disclaims and takes no
responsibility for any part of this Prospectus other than a reference to its
name and, in the case of PricewaterhouseCoopers, any statement which has
been included in this Prospectus with its consent.
Perpetual Trustee Company Limited (as Loan Note trustee and trustee under the
deed for Convertible Notes) and Perpetual Registrars Limited (as registrar) are
each named in the Prospectus for information purposes only. Neither have had
any involvement in the preparation of any part of this Prospectus.
EXPENSES OF THE RIGHTS OFFER, PLACEMENT AND CONVERTIBLE NOTE ISSUE
The total expenses connected with the Rights Offer, Placement and Convertible
Note issue payable by Envestra including underwriting fees, advisory fees, legal
fees, accounting fees, printing, advertising, stamp duty and other expenses, are
estimated to be approximately $10.1 million. The payments to be made by
Envestra to the Underwriters are summarised in Section 7.2 and Section 7.5.
8.8 ASIC Declarations and Exemptions
ASIC has granted various relief under sections 1084 and 1113 of the Corporations
Law in relation to the Offer, including:
• modifying section 1043 of the Corporations Law to enable the proceeds of
sale of the New Securities to be paid into one bank account maintained by
• relief from sections 1023 and 1096 of the Corporations Law so as to permit
the issue, sale and transfer of the Loan Notes without certificates or other
documents evidencing the debt by Envestra being prepared, other than the
issue of a global note to the Trustee (with the Loan Notes being interests in
that global note);
• modifying section 1017 of the Corporations Law so as not to require a
prospectus for the issue of Securities upon conversion of the Convertible
• modifying section 1030(2), 1030(4) and 1030(6) of the Corporations Law so the
Underwriters are not deemed to be directors of Envestra and are therefore not
required to sign the Prospectus; and
• a complete exemption from sections 1056(2) and 1056(5) of the Corporations
Law in relation to the Trust Deed (those sections would otherwise provide that
the Trustee would be permitted to apply to ASIC or a court if the property of
Envestra were or are likely to become insufficient to repay the principal debt
on the Loan Notes). The effect of these exemptions is that while there is
Finance Debt and the Trustee forms the opinion that Envestra will be unable
to discharge its debt obligation to Noteholders, the Trustee will be unable to
approach ASIC for an order restricting the activities of Envestra or, in certain
circumstances, apply to a court for various orders; and
• modifying section 1054 of the Corporations Law so that Envestra does not
have to comply with the covenant in section 1054(3)(a) of the Corporations
Law. That section requires the Trust Deed to contain a covenant by Envestra
to the Trustee that:
"… it will strive to carry on and conduct its business in a proper and efficient manner."
The section 1054 relief granted to Envestra means Envestra does not have to
comply with this provision in respect of Noteholders while all Loan Notes
issued under the Trust Deed form part of a Security in accordance with the
terms of the Trust Deed. However, the Company still owes an obligation to
Investors, in their capacity as shareholders to carry on and conduct its
business in a proper and efficient manner. Furthermore, while the section
1054 relief is in place, the Trustee is not obliged to enforce this covenant, as it
would usually do, as trustee for debenture holders under the Corporations
Envestra applied for the section 1054 relief at the request of Envestra’s bank
lenders, who are concerned to ensure that the rights of Investors are as far as
possible limited to those that a shareholder would have.
Investors should note that whether or not Envestra must comply with this
covenant, the Trustee’s rights of enforcement are in any event subordinated in
the manner described above.
8.9 ASX Waivers
ASX has granted the following waivers from the requirements of the Listing
Rules in favour of Envestra.
• A waiver from Listing Rule 1.1 Condition 7 to permit shareholders in Envestra
to each hold a parcel of Shares having a value of less than $2,000, on
condition that the Shares are stapled to Loan Notes so that the parcel of
Securities has a value of at least $2,000.
• A waiver from Listing Rule 8.10 to allow Envestra to refuse to register a
transfer of a Loan Note that is stapled to a Share, where the Share is partly
paid and Envestra has a lien on the Share for an unpaid call in accordance
with Listing Rule 6.13.
• A waiver from Listing Rule 14.4 in relation to Boral’s right to appoint and
remove directors of Envestra on condition that Envestra includes in each
annual report, and provides to any person who may subscribe for securities
pursuant to a prospectus, a prominent statement about the terms of the
Operating and Management Agreement (Existing Network) and the
Relationship Agreement and about Boral’s right to appoint and remove
directors of Envestra.
• A waiver from Listing Rule 14.11 so as not to disallow sub-underwriters to
the Rights Offer from voting at the general meeting to approve the Rights
Offer, Placement and Convertible Note issue.
• A waiver from Listing Rule 1.8 Condition 3 to permit EnVic Holdco to have net
tangible assets of less than $10 million on condition that Envestra guarantees
EnVic Holdco’s obligations under the Convertible Notes.
• A waiver from Listing Rule 2.1 Condition 5 to the extent necessary on
condition that the Convertible Note trust deed contains a limitation on the
amount that EnVic Holdco may borrow under the trust deed.
8.10 Allocation of New Securities
Application will be made for quotation of the New Securities offered under this
Prospectus on ASX within three days after the date of issue of the Prospectus.
It is expected that New Securities will be quoted as part of the same class as
Envestra participates in the Clearing House Electronic Subregister System
("CHESS") in accordance with the ASX Listing Rules and the Business Rules of
the Securities Clearing House ("SCH"). Envestra maintains an electronic issuer
sponsored subregister and an electronic CHESS subregister.
Investors have the option to hold Securities either on the CHESS subregister
under sponsorship of a broker or non-broker participant, or the issuer sponsored
subregister. The two subregisters together will make up the Australian
subregister of Securities of Envestra. Everyone acquiring Securities will have
their holding of Securities recorded on one of these subregisters.
Investors who elect to hold their Securities on the issuer sponsored subregister
will be provided with a holding statement (similar to a bank account statement)
on allocation that sets out the number of Securities allocated to them.
This statement will be issued as soon as practicable after the allocation.
For an Investor who holds Securities on the CHESS subregister, Envestra will, on
allocation of New Securities, issue an advice that sets out the number of New
Securities allocated to them under this Prospectus. This advice will be issued as
soon as practicable after allocation.
At the end of the month of allocation, SCH will provide each investor who holds
Securities on the CHESS subregister with a holding statement that confirms the
number of Securities allocated.
Holding statements (whether issued by SCH or the Registrar on behalf of
Envestra) will also provide details of an Investor’s Holder Identification Number
(HIN) in the case of a holding on the CHESS subregister or Security Holder
Reference Number (SRN) in the case of a holding on the issuer sponsored
A new statement will be sent to an Investor at the end of the month if the
balance of the Investor’s holding of Securities changes.
None of the advice or statements of holding referred to in this Section 8.10 is a
certificate of title or an acknowledgment of debt.
8.11 New Zealand Regulatory Disclosure
Securities are intended to be offered in New Zealand only to existing Security
Holders under the Securities Act (Overseas Companies) Exemption Notice 1997.
Investors should satisfy themselves as to the tax implications of investing in the
An investment in Securities may carry with it a currency exchange risk.
The financial reporting requirements applying in New Zealand and those
applying to Envestra may be different and Envestra’s financial statements may
not be compatible in all respects with financial statements prepared in
accordance with the New Zealand Securities Act 1978 and the New Zealand
Financial Reporting Act 1993.
The Rights Offer and allotment of the New Securities will be governed by this
Prospectus and will be made in accordance with the Corporations Law of
Australia under which this Prospectus has been lodged.
Envestra may not be subject in all respects to New Zealand law.
The contract in respect of the Securities may not be enforceable in New Zealand
This Prospectus has not been registered in New Zealand under and in
accordance with New Zealand law and may not contain all the information that a
New Zealand registered prospectus is required to contain.
It is not a condition of the exemption notice or notices that Envestra be listed on
the New Zealand Stock Exchange. Consequently New Zealand resident investors
may not have access to information concerning Envestra in the same way as
investors have in relation to an issuer listed on the New Zealand Stock Exchange.
8.12 Taxation for Foreign Security Holders
Foreign Security Holders should be aware of the operation of Australia’s thin
capitalisation rules under Division 16F of Part III of the Income Tax Assessment
Act 1936 (Cth). These provisions may operate to deny Envestra a deduction for
all or part of the interest paid on a Loan Note (or any other loan) to a Security
Holder, who is a non-resident of Australia for tax purposes, where that Security
Holder, together with its associates, holds a 15% or greater interest in Envestra.
A Security Holder will hold an interest in Envestra where it holds either
Securities, Rights or Convertible Notes. In such circumstances, Envestra will not
pay interest on the Loan Notes to the Security Holder. Section 7.3.2 (Conditions
2.4 to 2.6) details the restrictions on payment of interest where the Division 16F
provisions will or may operate to deny Envestra a deduction for interest paid to
foreign Security Holders.
*signed by his authorised agent
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