Declaration of Independence, Relevant Relationships and Indemnities Update: 29 October 2013 CET Resources Pty Ltd ACN 119 909 214 Coalpac Pty Limited ACN 003 558 914 Lithgow Coal Company Pty Limited ACN 073 632 952 Portland Road Pastoral Co Pty Ltd, in its own capacity and as trustee for Portland Road Unit Trust ACN 104 387 340 (the Companies or the Coalpac group of companies) The Corporations Act 2001 and professional standards require the Practitioner/s appointed to an insolvent entity to make a declaration as set out in this document as to: A. Their independence generally; B. Relationships, including: a. the circumstances of the appointment; b. any relationships with the Insolvent and others within the previous 24 months; c. any prior professional services for the Insolvent within the previous 24 months; d. that there are no other relationships to declare; and C. Any indemnities given, or up-front payments made to the Practitioner. The following declaration addresses these issues and is made on behalf of ourselves, our partners and the firm McGrathNicol. A. Independence We, Matthew Caddy and Shaun Fraser, of the firm McGrathNicol have undertaken a proper assessment of the risks to our independence prior to accepting the appointment as administrators of the Companies in accordance with the law and applicable professional standards. This assessment identified no real or potential risks to our independence. We are not aware of any reasons that would prevent us from accepting this appointment. We refer to our Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) dated 22 October 2013 and advise that as an indemnity has been provided since this DIRRI was issued, we have updated the information on this topic in section C below. B. Declaration of Relationships (i) Circumstances of appointment We had three telephone meetings with officers of the Companies (being David Liberman, Richard Davies and Tim Muller), during the period from 7 October 2013 to 18 October 2013. Mr Liberman is also representative of Jagen Pty Ltd (further details provided below). The purposes of these meetings were to: + understand the Companies current financial positions; + understand the Companies alternative courses of action; and
+ provide general information about insolvency processes. We received no remuneration for these attendances. We were also present at the meetings of Directors of the Companies where the Directors resolved to appoint the administrators. At the meeting we provided general information about the impact of administrations on the Directors duties and the Companies. These meetings do not affect our independence for the following reasons: + it is recognised by the Courts and the IPA s Code of Professional Practice that pre-appointment advice on the insolvency process and available options is necessary and does not amount to an impediment to accepting an appointment; and + discussions with officers of the Companies would not represent advice subject to review and challenge during the course of the administrations. (ii) Relevant Relationships (excluding Professional Services to the Insolvent) We, or a member or our firm, have, or have had within the preceding 24 months a relationship with: Name Nature of relationship Reasons why no conflict of interest or duty Australia and New Zealand Banking Group Limited (ANZ) ANZ holds a first ranking charge over the whole or substantially the whole of the property of the Companies. McGrathNicol undertakes corporate recovery and advisory work from time to time on instructions from ANZ. Each professional engagement undertaken for ANZ in relation to a particular entity or group of entities is conducted on an entirely separate basis which has no bearing on this appointment. These engagements are only commenced after full regard is given to potential conflicts of interest in relation to all interested stakeholders. McGrathNicol has not undertaken an engagement for ANZ in respect of the Companies. Given these factors, our independence in acting as voluntary administrators of the Companies has not been affected.
Name Nature of relationship Reasons why no conflict of interest or duty Jagen Pty Ltd (Jagen) Jagen, an investment firm, referred the Voluntary Administration of the Companies to McGrathNicol. Jagen also holds 49.9% of the equity of CET Resources Pty Ltd. Jagen has referred three previous engagements (one corporate recovery and two advisory) to McGrathNicol in the previous four years. Each professional engagement undertaken previously for Jagen has been in relation to other entirely unrelated entities that have no bearing on this appointment. There are no current engagements being undertaken for Jagen. These previous engagements were only commenced after full regard was given to potential conflicts of interest in relation to all interested stakeholders. McGrathNicol has not undertaken any previous engagement for Jagen in respect of the Companies and the referral of the voluntary administrations is entirely unconditional. Given these factors, our independence in acting as voluntary administrators of the Companies has not been affected.
Name Nature of relationship Reasons why no conflict of interest or duty Energy Australia Ltd (EA) EA holds a second ranking charge over the whole or substantially the whole of the property of three members of the Coalpac group of companies (Coalpac Pty Ltd, Lithgow Coal Company Pty Ltd and Portland Road Pastoral Co Pty Ltd), subordinated to the first ranking charge of ANZ. Amongst other things, EA's charge secures the obligations of Coalpac Pty Ltd under a coal supply agreement. McGrathNicol partners and staff not involved with the voluntary administration appointment have in the past undertaken advisory work from time to time on instructions from EA and some employees of McGrathNicol have undertaken short term secondments at EA. These secondments were all completed by 2012. Each professional engagement undertaken previously for EA, except one, has been in relation to other entirely unrelated entities that have no bearing on these appointments. One project undertaken by McGrathNicol for EA related to Coalpac Pty Ltd. The project involved the provision of financial advice to EA during the early stages of its consideration and formulation of a proposed option agreement for the sale and purchase of Coalpac Pty Ltd. This work involved the financial review of asset and liability values (report delivered June 2012) and the formulation of a contract completion mechanism (work completed September 2012). No advice was provided on any bid strategies by EA in the context of a distressed asset sale. Fees of $149,037 (GST exclusive) were paid for work completed in the period to September 2012. The financial advice provided by McGrathNicol was based on the assumption that certain additional mining licences would be granted to Coalpac Pty Ltd, which has not occurred. Further, EA recently served a notice of termination of the option agreement that it entered into with Coalpac Pty Ltd. As a result, the work undertaken by McGrathNicol has no applicability in the current circumstances of Coalpac Pty Ltd's administration. Moreover, as the work was not undertaken for any of the Companies, it will not be the subject of any review in the course of the voluntary administrations or any subsequent appointment. The work that McGrathNicol has undertaken for EA will not influence our ability to fully comply with our statutory and fiduciary obligations associated with the voluntary administrations of the Companies in an objective and impartial manner. For these reasons, our independence in acting as voluntary administrators of the Company has not been affected. (iii) Prior professional services to the Insolvent Neither we, nor our firm, have provided any professional services to the Companies in the previous 24 months. (iv) No other relevant relationships to disclose Other than those described above, there are no other known relevant relationships, including personal, business and professional relationships, from the previous 24 months with the Companies, any other associate of the Companies, a former insolvency practitioner appointed to the Companies or any person or entity that has a charge on the whole or substantially whole of the Companies property that should be disclosed.
C. Indemnities and Up-front Payments We have been provided with the following upfront payment for remuneration for the conduct of these administrations. Name Relationship to Company Nature of Indemnity or Payment ANZ Secured creditor (first ranking) $250,000 (exclusive of GST) from ANZ provided by way of a loan to the voluntary administrators towards the remuneration, costs, charges and expenses of the voluntary administration of the Companies. This payment is conditional on fees being paid only when approved pursuant to s449e of the Corporations Act. It is also conditional on there being supporting documentation to substantiate the expenses of the voluntary administration, if requested by ANZ. Where sufficient net Company assets are realised, the repayment of the loan will rank as a cost and expense of the voluntary administration. There are no other conditions placed upon the provision of this loan. This loan will not impede our independence as there are no conditions which will impact the objectivity of the voluntary administrators and the funds provided are essential to enable the voluntary administrators to take effective control of the assets of the Companies and develop realisation strategies. D. Appointments to Members of a Corporate Group As specified on page one of this Declaration, the administrators have been appointed as voluntary administrators of four entities within the Coalpac group of companies (members listed at the top of page one). The administrators are of the view that our appointment to each member of the Coalpac group of companies will have significant benefits to the conduct of the administrations, particularly in that this will provide for cost-savings and enable as accurate as possible a view to be obtained of the activities and financial position of the companies as a whole. The administrators are aware that there may be inter-company transactions within the Coalpac group of companies but at this time are not aware of any potential conflicts of interest arising from the appointments over the various group members. However, to the extent it becomes apparent that pre-appointment dealings between the Companies in the group may give rise to a conflict which may impact the outcome for creditors of either company, then the administrators undertake to disclose any such conflicts to the creditors and as appropriate, seek Court directions as to the means of resolving the potential conflict. Dated: 29 October 2013...... Matthew Caddy Shaun Fraser
Note: 1 If the circumstances change or new information is identified, we are required under the Corporations Act 2001 and the IPA Code of Professional Practice to update this Declaration and provide a copy to the creditors/committee with our next communication, as well as table a copy of any replacement Declaration at the next meeting of the insolvent s creditors/committee. 2 Any relationships, indemnities or up-front payments disclosed in the Declaration of Independence, Relevant Relationships and Indemnities ( DIRRI ) must not be such that the Practitioner is no longer independent. The purpose of components B and C of the DIRRI is to disclose relationships that, while they do not result in the Practitioner having a conflict of interest or duty, ensure that creditors are aware of those relationships and understand why the Practitioner nevertheless remains independent. Please note that the presentation of the above information is in accordance with the standard format suggested by the Insolvency Practitioners Association of Australia.