18 November 2008
NZX Regulation Decision
Pike River Coal Limited
Application for a Waiver from NZSX Listing Rule 9.2.1
Background
1. Pike River Coal Limited ("PRC") is listed on the NZSX Market.
2. NZSX Listing Rule ("Rule") 9.2.1 provides that an Issuer may not enter
into a Material Transaction with a Related Party, unless approved by an
Ordinary Resolution of the shareholders of that Issuer.
3. PRC is party to a Coal Offtake Agreement with Saurashtra Fuels Private
Limited ("SFP") and a Coal Offtake Agreement with Gujarat NRE Coal (NSW) Pty
Limited ("GNC") (together the "Coal Offtake Agreements").
4. Each of the Coal Offtake Agreements is a Material Transaction under Rule
9.2.2(a) because the price payable under each of the Coal Offtake Agreements
over their expected life is likely to have an Aggregate Net Value in excess
of 5% of the Average Market Capitalisation of PRC.
5. Each of SFP and GNC is a Related Party of PRC under Rule 9.2.3(c) because
SFP and GNC are each Associated Persons of New Zealand Oil & Gas Limited
("NZO") who is the holder of a Relevant Interest in 10% or more of a Class of
Equity Securities of PRC carrying Votes.
6. SFP and GNC are Associated Persons of NZO under Rule 1.3.2 because it is a
condition of the equity subscription agreement between NZO and GNC''s parent
company (Gujarat NRE Coke Limited) and the equity subscription agreement
between NZO and SFP''s subsidiary (Saurashtra World Holdings Private Limited)
that each company mutually supports the appointment of the other company''s
nominated director.
7. The Related Party nature of the Coal Offtake Agreements was disclosed in
the Offer Documents for PRC''s initial public offering and shareholders
therefore invested with full knowledge of these Related Party transactions.
8. PRC''s Offer Documents also disclosed that the price payable under each of
the Coal Offtake Agreements is to be renegotiated annually, by reference to
premium Queensland hard coking coal prices, and taking into account other
commercial considerations. PRC disclosed in its Offer Documents that the
price payable will be subject to the independent directors of PRC confirming
that the price negotiated represents a commercial and arms'' length price and
that the common directors of PRC and SFP, and the common directors of PRC
and GNC would take no part in that process or any deliberations by the PRC
Board of Directors concerning the annual review of the price. PRC also
disclosed in its Offer Documents that it will, on an annual basis, seek a
waiver from the requirement to obtain annual shareholder approval of the
renegotiated price and would provide NZX with an independent report regarding
the fairness of the reviewed price.
NZX Regulation Decision - Pike River Coal Limited
Application for Waiver from NZSX Listing Rule 9.2.1
Application
9. PRC has applied to NZX Regulation ("NZXR") for a waiver from the
requirement under Rule 9.2.1 to obtain shareholder approval in respect of the
renegotiation of the prices payable under each of the Coal Offtake Agreements
for the supply year commencing 1 April 2008.
10. In support of its application PRC made the following submissions:
(a) The price payable under the Coal Offtake Agreement with SFP for the
supply year commencing 1 April 2008 was conditionally finalised on 30 May
2008 between Mr John Dow, an independent director of PRC and Mr Rajesh Desai,
an independent director of SFP.
(b) The independent directors of PRC, have confirmed that the renegotiated
prices under the SFP Coal Offtake Agreement represent commercial and arm''s
length prices.
(c) Mr Dipak Argawalla, a director of both PRC and SFP, took no part in the
renegotiation process or in any deliberations of the PRC Board of Directors
concerning the annual review of the prices under the SFP Coal Offtake
Agreement.
(d) PRC has obtained an independent report dated 14 October 2008 from MinAxis
Pty Limited, an independent coal marketing consultant, certifying that the
price payable under the SFP Coal Offtake Agreement, is fair and reasonable to
all contract parties, and reflects typical levels for contract prices settled
at arms-length between major parties for internationally traded premium grade
hard coking coal.
(e) The price payable under the Coal Offtake Agreement with GNC for the
supply year commencing 1 April 2008 was conditionally finalised on 30 May
2008 between Mr John Dow, an independent director of PRC and Mr S Sananguly
Murari, an independent director of GNC.
(f) The independent directors of PRC, have confirmed that the renegotiated
prices under the GNC Coal Offtake Agreement represent commercial and arm''s
length prices.
(g) Mr Arun Kumar Jagatramka, a director of both PRC and GNC, took no part in
the renegotiation process or in any deliberations of the PRC Board of
Directors concerning the annual review of the prices under the GNC Coal
Offtake Agreement.
(h) PRC has obtained an independent report dated 14 October 2008 from MinAxis
Pty Limited, an independent coal marketing consultant, certifying that the
price payable under the GNC Coal Offtake Agreement, is fair and reasonable to
all contract parties, and reflects typical levels for contract prices settled
at arms-length between major parties for internationally traded premium grade
hard coking coal.
(i) PRC will, on an annual basis, for so long as SFP or GNC (as the case may
be), remains a Related Party of PRCL, seek a waiver from NZX from the
requirement under Listing Rule 9.2.1 to obtain shareholder approval of the
renegotiated prices payable under the applicable Coal Offtake Agreement.
(j) Details of the Coal Offtake Agreements were disclosed at pages 148-149
and 154 of the Prospectus for PRC''s initial public offering. Consequently,
investors invested in PRC with full knowledge of the contractual
arrangements, including, in particular, the NZX Regulation Decision - Pike
River Coal Limited Application for Waiver from NZSX Listing Rule 9.2.1
provision (and intended process) for the annual renegotiation of prices
payable under the Coal Agreements.
(k) Accordingly, given such disclosure and compliance with the process
described in the Prospectus for PRC''s initial public offering, it is not
envisaged that any shareholders of PRC will be prejudiced by the grant of the
waiver the subject of this application.
(l) While the waivers sought relate to the contract year commencing on 1
April 2008, mining of coal at the Pike River mine has not yet commenced and
no coal has as yet been supplied under the Coal Offtake Agreements.
Furthermore, SFP and GNC have confirmed in writing that the Coal Offtake
Agreements are conditional on shareholder approval or a waiver being
obtained.
(m)It is intended that in respect of future years, waivers will be sought
from NZX on an annual basis immediately after the coal price for the relevant
year has been renegotiated .
(n) Similar waivers were granted by NZX to Oyster Bay Marlborough Vineyards
Limited ("OBV") in 2004 and 2005 (o) The waiver sought is consistent with
the policy set out in
Footnote 2 to Listing Rule
9.2.1.
Rule 9.2.1
11. Rule 9.2.1 provides:
"Restriction: An Issuer shall not enter into a Material Transaction if a
Related Party is, or is likely to become:
(a) a direct or indirect party to the Material Transaction, or to at least
one of a related series of transactions of which the Material Transaction
forms part; or
(b) in the case of a guarantee or other transaction of the nature referred to
in paragraph
(d) of the definition of Material Transaction, a direct or indirect
beneficiary of such guarantee or other transaction,
unless that Material Transaction is approved by an Ordinary Resolution of the
Issuer."
(Amended 10/05/06)
12. Footnote 2 to Rule 9.2.1 provides:
NZX may waive the requirement to obtain the approval of a resolution for the
purposes of Rule 9.2.1 in respect of the annual or other renewal or
renegotiation of transactions which have been approved by a resolution under
Rule 9.2.1, if the Issuer produces a report from a suitable independent
person as to the fairness of the terms of the renewal or renegotiation.
Decision
13. On the basis that the information provided to NZXR is full and accurate
in all material
respects, NZXR grants PRC a waiver from Rule 9.2.1 in respect of the
renegotiation of NZX Regulation Decision - Pike River Coal Limited
Application for Waiver from NZSX Listing Rule 9.2.1
the price payable under the Coal Offtake Agreements for the supply year
commencing 1 April 2008.
Reasons
(a) Details of the Coal Offtake Agreements were disclosed in the Prospectus
for PRC''s initial public offering. Therefore, shareholders invested in PRC
with full knowledge of the contractual arrangements and their related party
nature.
(b) PRC''s Offer Documents also disclosed that the price payable under each of
the Coal Offtake Agreements is to be renegotiated annually and that the price
payable would be subject to the independent directors of PRC confirming that
the price negotiated represents a commercial and arms'' length price and that
the common directors of PRC and SFP, and the common directors of PRC and GNC
would take no part in that process or any deliberations by the PRC Board of
Directors concerning the annual review of the price. PRC also disclosed in
its Offer Documents that it will, on an annual basis, seek a waiver from NZX
from the requirement to obtain annual shareholder approval of the
renegotiated price and would provide NZX with an independent report regarding
the fairness of the reviewed price.
(c) PRC has provided NZX with certification from the independent directors of
PRC that the renegotiated prices under the Coal Offtake Agreements represent
commercial and arm''s length prices.
(d) PRC has provided NZX with an independent report dated 14 October 2008
from MinAxis Pty Limited, an independent coal marketing consultant,
certifying that the price payable under the Coal Offtake Agreements, is fair
and reasonable to all contract parties, and reflects typical levels for
contract prices settled at arms-length between major parties for
internationally traded premium grade hard coking coal.
(e) PRC has provided NZX with a certified extract of the board minutes,
confirming that the common directors took no part in the renegotiation
process or any deliberations by the PRC Board of Directors concerning the
renegotiation of the price payable under the Coal Offtake Agreements.
(f) The application fits into the policy set out in Footnote 2 to Rule 9.2.1.
(g) Similar waivers were granted by NZX to Oyster Bay Marlborough Vineyards
Limited ("OBV") in 2004 and 2005, and to Speirs Group Limited on 13 August
2004.
ENDS.
NZX Regulation Decision - Pike River Coal Limited
Application for Waiver from NZSX Listing Rule 9.2.1
End CA:00173012 For:PRC Type:WAV/RULE Time:2008-11-18:13:27:37