WAV/RULE: NWF: NZX Regulation- NWF - Waiver from NZSX Listing Rule 9.2.1

7 Apr 2010 5:30 pm

NWF 07/04/2010 WAV/RULE

REL: 1730 HRS NZ Windfarms Limited

WAV/RULE: NWF: NZX Regulation- NWF - Waiver from NZSX Listing Rule 9.2.1

1 April 2010 NZX Regulation Decision NZ Windfarms Limited Application for Waiver from NZSX Listing Rule 9.2.1 and Ruling in respect of NZSX Listing Rule 9.2.4(b)

Background NZ Windfarms Limited ("NWF") is an NZSX Listed Issuer ("Issuer"). In December 2009 NWF obtained short term funding ("Loan") from Vector Limited ("Vector"), the holder of 19.9% of NWF's ordinary shares ("Shares"), to fund its ongoing operations. NWF now wishes to raise capital to repay the Loan from Vector and to fund the completion of NWF's Te Rere Hau wind farm and NWF's ongoing working capital requirements. It is currently intended that the capital raising will be undertaken by way of a pro-rata renounceable offer of Shares to existing shareholders in New Zealand ("Rights Offer").

NWF currently intends to raise approximately $31,400,000, with a minimum subscription amount sought of $25,600,000. NWF has engaged Goldman Sachs JBWere ("GSJBW") as lead manager and arranger in relation to the Rights Offer ("GSJBW Engagement").

While NWF is unlikely to obtain underwriting commitments prior to announcing the Rights Offer, to the extent that there is a shortfall from the offer, the Company may place some, or all, of the shortfall with existing institutional and other eligible shareholders pursuant to underwriting commitments solicited after the commencement of the Rights Offer ("Underwriting Commitments"). The offer of Shares to those who provide Underwriting Commitments will be separate and distinct offers from the Rights Offer, and will be made pursuant to Rule 7.3.4(d).

Under the terms of the GSJBW Engagement it is proposed that: NWF will pay GSJBW: a management fee payable on the allotment of Shares to be issued in respect of the capital raising; a shortfall incentive fee of no more than 3% of the aggregate subscription monies received from the allotment of shares under the capital raising; and GSJBW will be entitled to use all, or any part of, the shortfall incentive fee at its absolute discretion, including to: pay a fee to new and existing institutional and other eligible shareholders to encourage their uptake of the Rights Offer; and solicit partial or full underwriting commitments for any shortfall from existing institutional and other eligible shareholders and investors (including Vector and AMP (as defined below)) on commercial arms' length terms (as determined by GSJBW) at the same issue price as that offered in the Rights Offer ("Underwriting Placement"). A standard fee structure is being considered that will be equal to a specified percentage of the relevant underwriting commitment; and potentially pay a broker handling fee to market participants to facilitate investor uptake of the Rights Offer, together being ("Shortfall Incentive Arrangements").

Three of NWF's shareholders currently hold 10% or more of NWF's Shares, being: Vector, who holds 19.9%; AMP Capital Investors (New Zealand) Limited ("AMP"), who holds 12.05%; and Tyndall Investment Management New Zealand Limited ("Tyndall"), who holds 11.52%, and are therefore each Related Parties of NWF. The Average Market Capitalisation of NWF is approximately NZ$34,566,047. As such: the issue of Shares under the Rights Offer; and the engagement of GSJBW; will both constitute Material Transactions under Rules 9.2.2(b) and 9.2.1(e).

Additionally, to the extent that the value of the Shares issued in respect of the Underwriting Placement exceeds 10% of NWF's Market Capitalisation, this will also constitute a Material Transaction under Rule 9.2.2(b).

Rule 9.2.1 restricts an Issuer entering into a Material Transaction if a Related Party is, or is likely to become, 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.

Accordingly, Rule 9.2.1 requires NWF to obtain prior shareholder approval of the GSJBW Engagement and the Underwriting Placement, in the event that the value of the Shares issued in satisfaction of underwriting commitments received exceeds 10% of NWF's Market Capitalisation, and in the event that GSJBW enters into Shortfall Incentive Arrangements with Vector, AMP or Tyndall.

Application 1 NWF has approached NZX Regulation ("NZXR") seeking a waiver from the requirement of Rule 9.2.1 to obtain shareholder approval for the GSJBW Engagement and Underwriting Placement. In support of its application, NWF submits that: Rule 9.2.1 is aimed a regulating those transactions in which a Related Party may gain favourable consideration because of that party's relationship with the issuer, or where there is a perception that favourable consideration may be afforded. In respect of the GSJBW Engagement: The Shortfall Incentive Arrangements were initially proposed by GSJBW, not the Company or any Related Party of NWF, as a mechanism to minimise any shortfall in the Rights Offer. The GSJBW Engagememt, including Shortfall Incentive Arrangements, will be negotiated by NWF's management on an arm's length commercial basis and approved by NWF's independent directors, reflecting, market fee structures and market precedents. No Related Party will have any involvement in negotiating the GSJBW Engagement. The GSJBW Engagement and, in particular, the Shortfall Incentive Arrangements, do not create a transfer of value of the nature contemplated in Rule 9.2.1. The shortfall incentive fee will be fixed at a specified percentage of the gross proceeds of the capital raising. Any fees paid to Related Parties will come directly out of this fee and, therefore, will not add any additional cost to NWF. Further, any transfer of value will be from GSJBW (rather than NWF) to the Related Parties, and it is GSJBW and not NWF who determines how the shortfall incentive fee is to be used and to whom it is paid. In respect of the Underwriting Placement: The allotment of Shares in satisfaction of subscriptions received as a result of any underwriting commitments will not result in a transfer of value of the nature contemplated in Rule 9.2.1, as the Shares will be alloted at the same issue price per Share as the issue price of Shares offered under the Rights Offer. Shares offered for subscription by any Related Party in these circumstances will have first been offered to all eligible shareholders under the Rights Offer (who would have also had the opportunity to sell their rights should they have wished to do so). Shareholders who wish to purchase Shares in excess of their entitlement under the Rights Offer will also be able to do so by seeking to purchase rights on the NZSX market during the rights trading period. While a fee may be paid by GSJBW in connection with any underwriting commitments, such fees will approximate market fee structures and market precedents. The waivers sought are similar to the waivers granted by NZXR from Rule 9.2.1 in the recent rights issues undertaken by PGG Wrightson Limited, Pyne Gould Corporation Limited, Skellerup Holdings Limited and Tower Limited to enable Related Parties of those Issuers to participate in sub-underwriting (or similar) arrangements.

Rules Rule 9.2.1 provides: 9.2.1 An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to become: 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 in the case of a guarantee or other transactions 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 Ordinary Resolution of the Issuer. Rule 9.2.2 provides: For the purposes of Rule 9.2.1, "Material Transaction" means a transaction or a related series of transactions whereby an Issuer: (a) purchases or otherwise acquires, gains, leases (as lessor or lessee) or sells or otherwise disposes of, assets having an aggregate Net Value in excess of 10% of the Average Market Capitalisation of the Issuer; or (b) issues its own Securities or acquires its own Equity Securities having a market value in excess of 10% of the Average Market Capitalisation of that Issuer, save in the case of an issue pursuant to Rule 7.3.5 where only the market value of those securities being issued to the Related Party or to any Employees (as defined in Rule 7.3.6) of the Issuer are to be taken into account;

Footnote 1 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 if it is satisfied that the personal connections with, or involvement or personal interest of, a Related Party are immaterial or plainly unlikely to have influenced the promotion of the proposal to enter into the transaction or its terms and conditions.

Decision- Rule 9.2.1 On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants NWF a waiver from the requirement to obtain shareholder approval of the GSJBW Engagement and the Underwriting Placement, to the extent that there is such a shortfall from the Rights Issue so as to result in the value of Shares to be issued exceeding 10% of NWF's Average Market Capitalisation, and in the event that GSJBW enters into Shortfall Incentive Arrangements with Vector, AMP and/ or Tyndall, on the following conditions: the directors of NWF not Associated (as that term is defined in the Rules) with Vector, AMP or Tyndall, certify to NZXR that: The GSJBW Engagement was negotiated on an arms' length and commercial basis; The terms of the GSJBW Engagement are fair and in the best interests of NWF and NWF's shareholders that are not Associated with Vector, AMP or Tyndall; The decision to enter into, and terms of, the GSJBW Engagement were not influenced by the directors of NWF who are Associated (as that term is defined in the Rules) with Vector, AMP or Tyndall; and The offer document for the Rights Offer records that a waiver from Rule 9.2.1 has been granted to NWF and details the conditions of this waiver.

Reasons In coming to its decision to grant NWF a waiver from Rule 9.2.1, NZXR considered the following matters: The policy behind Rule 9.2.1 is to regulate transactions in which a person may, by virtue of their relationship with the Issuer, gain favourable consideration or influence the proposal to enter into the transaction. In this instance, the decision to undertake the Rights Offer is a result of NWF's need to repay the Loan and obtain ongoing working capital. The fees payable to GSJBW in respect of the GSJBW Engagement are as a result of commercial arms' length discussions between GSJBW and NWF, excluding Directors who are Associated with Vector, AMP or Tyndall. Any fees that may subsequently be paid to Vector, AMP and/ or Tyndall, will be paid directly from the fees paid to GSJBW, and will be subject to the competing commercial interests of GSJBW. Accordingly, NZXR is satisfied that the promotion, or terms of, the GSJBW Engagement have not been influenced by the relationship between NWF and either of the Related Paties. There is precedent for this decision, including the waiver decisions in respect of PGC dated 22 September 2009, SKL dated 2 September 2009 and PRC dated 16 March 2009.

Application 2- Ruling 9.2.4(b) NWF has approached NZXR seeking a Ruling that the exception contained in Rule 9.2.4(b) applies to the Rights Offer notwithstanding that: to the extent that those existing institutional and other eligible shareholders receive a fee from GSJBW to encourage their uptake of the Rights Offer, it could be said that all shareholders are not receiving the same opportunity to receive the same benefit; and NWF intends to, pursuant to Rule 7.10.4, scale entitlements to Shares to a minimum entitlement of 1000 Shares (being the minimum holding for rights in NWF under the Listing Rules).

Rules Rule 9.2.4 provides: Rule 9.2.1 shall not apply to: ... (b) the issue, acquisition or redemption by an Issuer of Securities of that Issuer, or the giving by an Issuer of financial assistance for the purposes of, or in connection with, the purchase of Securities, if all holders of Securities of the Class in question are treated in the same way, so that each such holder has an opportunity to receive the same benefit in respect of each Security held by that holder except to the extent that an issue excludes holders outside New Zealand in accordance with Rule 7.3.4(g). For the purposes of this paragraph, the transfer, by an Issuer which is a company registered under the Companies Act 1993, of shares held by that company in itself, shall be deemed to constitute an issue of Securities.

Rule 7.10.4 provides: Entitlements to Rights may be scaled to a minimum number not greater than a Minimum Holding, and shall be altered to disregard fractions. The announcement of the Rights issue and any Offering Document shall state the terms on these matters.

Decision- Application 2 On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR Rules that the exception contained in Rule 9.2.4(b) applies to the Rights Offer notwithstanding that some existing institutional and other eligible shareholders may receive a fee from GSJBW to take up their entitlements and that NWF may, pursuant to Rule 7.10.4, scale entitlements to Shares to a minimum entitlement of 1000 Shares.

Reasons- Application 2 In coming to the decision to provide the Ruling in the context of the fees that may be paid to existing institutional and/ or other eligible shareholders, NZXR has considered the following: The policy behind Rule 9.2.4(b) is to exempt Issuers from the requirement to obtain shareholder approval of a Material Transaction as a result of a Related Party's participation in a pro-rata offer made to all shareholders.

In this instance, NWF is offering all shareholders the same benefit and the same opportunity to participate in the Rights Offer on the same terms. The discretion afforded to GSJBW under the terms of its engagement gives rise to the requirement for a Ruling in respect of Rule 9.2.4(b), on the basis that any fee paid by GSJBW to an existing institutional and/ or other eligible shareholder to take up their respective entitlements is, in effect, a subsidy of the issue price under the Rights Offer.

NZXR is of the view that, in this instance, any fee paid by GSJBW does not contravene the policy of the Rule, on the basis that there is parity between the benefit provided by NWF to all of its shareholders and that NWF should not prejudiced by the arrangements between third parties and its shareholders, where the arrangements between the Issuer and that third party have been negotiated on an arms' length and commercial basis. In coming to the decision to provide the Ruling in the context of the scaling of entitlements to less than Minimum Holdings, NZXR has considered the following:

The policy behind Rule 9.2.4(b) is to exempt Issuers from the requirement to obtain shareholder approval of a Material Transaction as a result of a Related Party's participation in a pro-rata offer made to all shareholders on the same basis. Rule 7.10.4 recognises that it is undesirable for Issuers to have many small parcels of Securities, and allows for entitlements to be scaled upwards to minimise the extent of such parcels, without unduly diluting, or otherwise prejudicing, other shareholders interests.

Accordingly, while holders of Shares who are entitled to Rights fewer than a Minimum Holding may obtain an opportunity, or receive a benefit greater than other shareholders, this does not contravene the intent of Rule 9.2.4(b) in such a way that shareholder approval ought to be obtained by NWF.

Confidentiality NWF has requested that these applications remain confidential until the offer is announced to market. NZXR grants this request, as it conforms with the policy contained in footnote 1 to Rule 1.11.2.

ENDS. End CA:00193472 For:NWF Type:WAV/RULE Time:2010-04-07:17:30:15

More announcements for NWF