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Summary of

Securities Act (Powerco Limited) Exemption Notice 2005

2005/58

Gazetted on 11 March 2005
Expires on 30 June 2005

Effects of the exemption
Powerco Limited (Powerco) is able to:

• include financial information in its prospectus that differs from the five year summary financial statements usually required;
• exclude certain commercially sensitive provisions from certain material contracts that are required to be filed at the Companies Office.

Powerco is not required to:

• disclose restrictions on the ability of Powerco to borrow, relating to the commercially sensitive provisions in the material contracts;
• make a complete copy of each of the material contracts publicly available;
• disclose the names of the investors who are a party to some of the material contracts.

Background
Powerco was incorporated in March 2000, following the amalgamation of the former Powerco group with CentralPower Limited.

Powerco is seeking to raise up to $250 million through an offer of debt securities, in the form of credit wrapped notes, to institutional and retail investors in New Zealand. The securities will be issued under a trust deed, with The New Zealand Guardian Trust Company Limited as trustee. Westpac Banking Corporation will be lead arranger and facility agent.

The exemption
Powerco is exempt, subject to conditions, from:

• regulation 7(1)(a) to the extent that the prospectus must be accompanied by the specified material contracts;
• clause 33(b) of Schedule 2 of the Regulations in so far as this applies to any of the specified material contracts;
• clause 7(3) of Schedule 2;
• clause 9(b) of Schedule 2 to the extent that this requires the prospectus to contain the names of the other parties to the Note Purchase Agreements;
• clause 13(2) of Schedule 2 to the extent that the prospectus to include any restrictions on the ability of Powerco or other members of the borrowing group to borrow arising from specified provisions in the Note Purchase Agreement, Term Loan Facility Agreement, Standby Facility Agreement, and Facilities Agreement.

Conditions
The exemptions from regulation 7(1)(a) of the Regulations and clauses 13(2) and 33(b) of the schedule 2 of the Regulations are subject to the conditions that the prospectus contains or is accompanied by:

• the specified material contracts other than the excluded provisions;
• a statement that Powerco's directors certify that non-disclosure of the excluded provisions does not make the prospectus or investment statement misleading by not referring or giving proper emphasis to any adverse circumstances;
• a statement of the places and times where the specified material contracts (excluding the excluded provisions) may be inspected on request and free of charge;
• a statement that the financial covenants in each Note Purchase Agreement, the Term Loan Facility Agreement, the Standby Facility Agreement, and the Facilities Agreement may be amended at any time without the consent of securityholders or the trustee, and that in the opinion of the directors these financial covenants are not material information on which investors should rely when considering whether or not to apply for the debt securities;
• statements that certain provisions of specified material contracts have not been included in the copies filed with the Registrar, the general nature of these provisions, and why they are not included.

The exemption from clause 7(3) of Schedule 2 is subject to the condition that the prospectus contains:

• the information required under that clause in respect of: -
  • Powerco (for certain periods between 1 September 2000 and 30 September 2004);
  • the former Powerco group (for certain periods between 1 April 1999 and 31 August 2000);
  • the CentralPower Group (for certain periods between 1 April 1999 and 31 August 2000); and
• a brief description of the merger and asset transactions undertaken by the former Powerco group and the CentralPower Group from 1 April 1999 to 31 March 2000.

Reasons
The Commission considers that the exemption from clause 7(3) of Schedule 2 of the Securities Regulations 1983 is appropriate because:

• under the conditions of exemption Powerco will provide appropriate alternative financial information to potential investors;
• Powerco has not previously presented any combined CentralPower Limited/former Powerco Limited financial information for the accounting periods ending prior to 1 September 2000;
• it would be difficult from an accounting perspective, and expensive for Powerco Limited to combine the separate financial information for CentralPower Limited and the former Powerco given the limited base information that is currently held by Powerco in relation to CentralPower Limited;
• in the circumstances of this offer, the presentation of combined historical financial data for the period from 1 April 1999 to 31 August 2000 would be of limited relevance to potential investors in relation to the offer.

The Securities Commission considers that the exemptions from regulation 7(1)(a) of the Securities Regulations 1983 and clauses 9(b), 13(2) and 33(b) of Schedule 2 of those regulations are appropriate because:

• the exemptions from regulations 7(1)(a) of the Securities Regulations 1983 and from clauses 9(b), 33(b) and 13(2) of Schedule 2 of those regulations meet the criteria stated in the Securities Commission's Exemption Policy Note for "Applications to Exclude Commercially Sensitive Information from Material Contracts". (The Exemption Policy Note can be viewed on the Commission's website at www.seccom.govt.nz/exemptions/exemption-policy.shtml);
• the detriment to the commercial interests of Powerco Limited by the disclosure of the excluded provisions would outweigh any benefit to prospective investors from their disclosure;
• directors of the issuer must warrant that the non-disclosure of the excluded provisions does not make the relevant prospectus misleading in any material particular by a failure to refer, or give proper emphasis, to any adverse circumstances;
• the prospectus must state that information has been deleted from the contracts in question, the reasons why that information has been deleted, and the general nature of the material information that has been deleted;
• in respect of certain deleted material. Powerco's prospectus must contain additional warnings for investors to the effect that they should not give weight to certain borrowing covenants as they can be changed by Powerco.