Exhibit (a)(1)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the action you should take, you should immediately consult your
stockbroker, bank manager, solicitor, accountant or other independent financial
adviser duly authorised under the Financial Services and Markets Act 2000 if you
are resident in the United Kingdom or, if not, another appropriately authorised
independent financial adviser.
If you have sold or otherwise transferred all of your Innogy Shares or Innogy
ADSs, please send this document, together with the accompanying documents, as
soon as possible, to the purchaser or transferee, or to the stockbroker, bank or
other agent through whom the sale or transfer was effected for onward
transmission to the purchaser or transferee. However, such documents should not
be forwarded or transmitted in or into Australia, Canada or Japan or any other
jurisdiction if such action would constitute a violation of the relevant laws in
such jurisdictions. See paragraph 6 of Part B of Appendix I to this document.
This document should be read in conjunction with the accompanying Acceptance
Forms which form part of this document.
- --------------------------------------------------------------------------------
Recommended Cash Offer
by
a wholly-owned subsidiary of
RWE AG
and (outside the United States) by
Merrill Lynch
on its behalf
for
Innogy Holdings plc
[LOGO] RWE [LOGO] Innogy
One Group.
Multi Utilities.
Holders of Innogy Shares
If you are a holder of Innogy Shares and wish to accept the Offer, you should
complete the Form of Acceptance in accordance with the instructions set out in
paragraph 13 of the letter from Merrill Lynch in this document and on the Form
of Acceptance.
Return the completed Form of Acceptance (together with any appropriate documents
of title) using the enclosed reply-paid envelope as soon as possible, but in any
event so as to be received by the Receiving Agent not later than 3.00 p.m.
(London time), 10.00 a.m. (New York City time) on 26 April 2002.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before completing the Form of Acceptance. Only your CREST sponsor will be able
to send the necessary TTE Instructions to CRESTCo.
If you are a holder of Innogy ADSs and wish to accept the Offer, you should
follow the instructions set out in paragraph 13(c) of the letter from Merrill
Lynch in this document and in the Letter of Transmittal.
Merrill Lynch is acting for RWE and the Offeror and for no one else in
connection with the Offer and will not be responsible to anyone other than RWE
and the Offeror for providing the protections afforded to clients of Merrill
Lynch or for providing advice in relation to the Offer.
CSFB and Deutsche Bank are acting for Innogy and for no one else in connection
with the Offer and will not be responsible to anyone other than Innogy for
providing the protections afforded to clients of CSFB and Deutsche Bank or for
providing advice in relation to the Offer.
The Offer in the United States is made solely by the Offeror, and neither
Merrill Lynch nor any of its affiliates is making the Offer in the United
States.
Unless otherwise determined by RWE and permitted by applicable law and
regulation, the Offer (including the Loan Note Alternative) is not being made,
directly or indirectly, in or into, Australia, Canada or Japan and the Offer is
not capable of acceptance from or within Australia, Canada or Japan.
Accordingly, neither this document nor the Forms of Acceptance are being or may
be mailed or otherwise forwarded, distributed or sent into or from Australia,
Canada or Japan and doing so may render any purported acceptance of the Offer
invalid. All holders of Innogy Shares and Innogy ADSs (including nominees,
trustees or custodians) who may have a contractual or legal obligation, or may
otherwise intend, to forward this document and/or the Acceptance Forms, should
read the further details in this regard which are contained in paragraph 6(e) of
Part B of Appendix I to this document before taking any action.
The Loan Notes which may be issued pursuant to the Loan Note Alternative have
not been, and will not be, listed on any stock exchange and have not been, and
will not be, registered under the US Securities Act or under any relevant laws
of any state or other jurisdiction of the United States, nor have the clearances
been, nor will they be, obtained from the securities commission or similar
authority of any province or territory of Canada and no prospectus has been, or
will be, filed, or registration made, under any securities law of any province
or territory of Canada, nor has a prospectus in relation to the Loan Notes been,
nor will one be, lodged with, or registered by, the Australian Securities and
Investments Commission, nor have any steps been taken, nor will any steps be
taken, to enable the Loan Notes to be offered in compliance with applicable
securities laws of Japan. Accordingly, unless an exemption under relevant
securities laws is available, the Loan Notes may not be offered, sold, re-sold
or delivered, directly or indirectly, in, into or from the United States,
Australia, Canada or Japan or any other jurisdiction in which an offer of Loan
Notes would constitute a violation of relevant laws or require registration of
the Loan Notes, or to or for the account or benefit of any US person or resident
of Australia, Canada or Japan or any other such jurisdiction.
Any person (including nominees, trustees and custodians) who would, or otherwise
intends to, forward this document or the Form of Acceptance or any accompanying
document to any jurisdiction outside the United Kingdom, should read paragraph 6
of Part B of Appendix I to this document before taking any action.
(i)
TO ACCEPT THE OFFER:
1. Complete the Form of Acceptance in accordance with paragraph 13 of the
letter from Merrill Lynch contained on page 16 of this document. A
step-by-step guide to completing the Form of Acceptance has been sent to
you with this document.
2. Return as soon as possible the completed Form of Acceptance (along with any
appropriate documents of title, such as your share certificate) using the
enclosed reply-paid envelope.
If you require help contact the Helpline on:
0845 300 2527 in the UK*
866 867 1144 in the US or
+44 20 7335 7287 elsewhere
Acceptances of the Offer must be received by 3.00 p.m. (London time) on 26 April
2002.
IF YOU ARE A HOLDER OF INNOGY ADSs, TO ACCEPT THE OFFER:
1. Complete the Letter of Transmittal in accordance with paragraph 13(c) of
the letter from Merrill Lynch.
2. Return as soon as possible the completed Letter of Transmittal (along with
any appropriate documents of title, such as your Innogy ADRs) to the
Depositary, using the enclosed reply-paid envelope.
*Calls charged at local rate
(ii)
If you are a resident of the United States, please read the following:
Offer into the United States
The Offer is being made for securities of a UK company and, while the Offer is
subject to UK and US disclosure requirements, US investors should be aware that
this Offer Document has been prepared in accordance with a UK format and style,
which differs from the US format and style. In particular, the appendices to
this document contain information concerning the Offer required by UK and US
disclosure requirements which may be material and which has not been summarised
elsewhere in this document. In addition, the financial statements of the Innogy
Group reproduced in this document are presented in pounds sterling and have been
prepared in accordance with UK generally accepted accounting principles and the
financial statements of the RWE Group reproduced in this document are presented
in euro and have been prepared in accordance with International Accounting
Standards and thus may not be comparable to financial statements of US companies
or companies whose financial statements are prepared in accordance with US
generally accepted accounting principles.
Innogy is organised under the laws of England and Wales. RWE and the Offeror are
organised under the laws of Germany. Some or all of the officers and directors
of Innogy, RWE and the Offeror are residents of countries other than the United
States and all or a substantial portion of the assets of Innogy, RWE, the
Offeror and such officers and directors are located outside the United States.
As a result, it may not be possible for US shareholders of Innogy to effect
service of process within the United States upon Innogy, RWE or the Offeror or
such persons or to enforce against any of them judgments of US courts predicated
upon the civil liability provisions of the federal securities laws of the United
States.
As part of the Offer, Innogy Shareholders who are eligible to do so may elect
for the Loan Note Alternative. The effect of electing for the Loan Note
Alternative will be to allow eligible Innogy Shareholders resident in the UK to
defer any taxable gain arising on a disposal of their Innogy Shares until such
time as the Loan Notes are transferred or redeemed. Such tax treatment is not
available for the Loan Note Alternative under US federal income tax laws and the
Loan Note Alternative is not available to Innogy Shareholders who are US
persons. The Loan Note Alternative is also not available to holders of Innogy
ADSs.
In accordance with the City Code, normal UK practice and Rule 14e-5 under the
Exchange Act ("Rule 14e-5"), Merrill Lynch, CSFB and Deutsche Bank and/or their
respective affiliates will continue to act as connected exempt market makers or
connected exempt principal traders in Innogy Shares on the London Stock
Exchange. Information regarding such activities which is required to be made
public in the United Kingdom pursuant to the City Code is reported to the London
Stock Exchange. This information will also be made available to US holders of
Innogy Shares and Innogy ADSs, on contacting the Information Agent on the
Helpline.
In addition, in accordance with normal UK practice and pursuant to exemptive
relief granted by the SEC from Rule 14e-5, the Offeror or its nominees or
brokers (acting as agents) may make certain purchases of, or arrangements to
purchase, Innogy Shares outside the United States during the period in which the
Offer remains open for acceptance. In accordance with the requirements of Rule
14e-5 and with the exemptive relief granted by the SEC, such purchases, or
arrangements to purchase, must comply with applicable UK rules, including the
City Code, the rules of the UK Listing Authority and the rules of the London
Stock Exchange. This information will be disclosed in the United States through
amendments to the Offeror's Tender Offer Statement on Schedule TO on file with
the SEC to the extent that such information is made public in the United Kingdom
pursuant to the City Code. Free copies of the Tender Offer Statement are
available on the SEC website at www.sec.gov.
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or any understanding (whether formal or informal) to acquire or
control securities of Innogy, owns or controls, or becomes the owner or
controller, directly or indirectly, of one per cent. or more of the issued
Innogy Shares is generally required under the provisions of Rule 8 of the City
Code to notify the London Stock Exchange and the Panel of every dealing in such
securities during the Offer Period. Please consult your financial adviser
immediately if you believe this Rule may be applicable to you.
This document contains certain "forward-looking" statements within the meaning
of the United States federal securities laws. These statements are naturally
subject to uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein. The forward-looking
statements include statements about the feasibility and benefits of the
acquisition of Innogy by the Offeror. Factors that would cause actual results to
differ materially from those described herein include: the inability to obtain
necessary regulatory approvals or to obtain them on acceptable terms; the
inability to integrate successfully Innogy within the RWE Group or to realise
synergies from such integration; costs related to the acquisition of Innogy; the
economic environment of the industries in which RWE and Innogy operate; failure
to retain Innogy management; regulatory change in the UK electricity, gas or
water markets; change in the price of certain commodities including gas, coal
and electricity; the general economic environment; and other risk factors
detailed in Innogy's filings with the SEC and in the material furnished to the
SEC by RWE.
In the United States, the Offer is made solely by the Offeror, and neither
Merrill Lynch nor any of its affiliates is making the Offer in the United
States.
(iii)
TABLE OF CONTENTS
Page
FREQUENTLY ASKED QUESTIONS 2
LETTER FROM THE CHAIRMAN OF INNOGY HOLDINGS PLC 6
LETTER FROM MERRILL LYNCH
1. Introduction 10
2. The Offer 10
3. Loan Note Alternative 11
4. Background to and Reasons for the Offer 12
5. Irrevocable Undertakings 13
6. Information on the RWE Group 13
7. Information on the Offeror 13
8. Information on the Innogy Group 14
9. Employee Matters and Share Incentive Plans 14
10. Inducement Fee 14
11. Taxation 15
12. Overseas Holders of Innogy Securities 15
13. Procedure for Acceptance of the Offer 16
14. Rights of Withdrawal 20
15. Settlement 20
16. Further Information 22
17. Action to be Taken 22
APPENDIX I Conditions and Further Terms of the Offer 23
APPENDIX II Particulars of the Loan Notes 49
APPENDIX III Financial Information on the Innogy Group 53
APPENDIX IV Financial Information on the RWE Group 72
APPENDIX V Additional Information 88
APPENDIX VI Definitions 112
1
FREQUENTLY ASKED QUESTIONS
The following are some of the questions you, as an Innogy Shareholder and/or
holder of Innogy ADSs, may have and answers to those questions. You are advised
to read carefully the remainder of this document and the accompanying Form of
Acceptance (in relation to Innogy Shares) or Letter of Transmittal (in relation
to Innogy ADSs).
1. Who is offering to buy my shares?
The Offer is being made by the Offeror, a wholly-owned subsidiary of RWE,
incorporated in Germany for the purposes of making the Offer, and (outside the
United States) by Merrill Lynch on its behalf. RWE is a German corporation,
headquartered in Essen, Germany. RWE common stock's main listing is on the
Frankfurt Stock Exchange.
RWE is an international multi-utility company. Its core businesses are
electricity, gas, water, waste management and utility-related services. In the
UK, RWE already owns Thames Water, which it successfully acquired in late 2000.
2. What are the classes and amounts of Innogy Securities sought in the Offer?
The Offeror is seeking to acquire all of the issued and to be issued Innogy
Securities, comprised of:
- - Innogy Shares listed on the London Stock Exchange; and
- - Innogy ADSs listed on the New York Stock Exchange.
3. What would I receive in exchange for my Innogy Securities?
The Offeror is offering to pay:
for each Innogy Share 275 pence in cash
for each Innogy ADS (each Innogy ADS representing
10 Innogy Shares) 2,750 pence in cash
4. How do I accept the Offer?
If you are a holder of Innogy Shares, to accept the Offer, you must deliver the
certificates representing your Innogy Shares, together with a completed Form of
Acceptance, to the Receiving Agent not later than the time and date on which the
Offer expires (see question 8 below).
If you are a holder of Innogy ADSs, to accept the Offer, you must deliver your
Innogy ADRs evidencing your Innogy ADSs, together with a completed Letter of
Transmittal, to the Depositary not later than the time and date on which the
Offer expires (see question 8 below).
If your Innogy ADSs are held in "street name" in the United States, your nominee
can tender them through the applicable book entry transfer system. Also, in the
case of Innogy ADSs, if you cannot get any document or instrument that is
required to be delivered by the expiration of the Offer, you may gain some time
by following the procedures for guaranteed delivery. See paragraph 13(c) of the
letter from Merrill Lynch and paragraph 10 of Part B of Appendix I to this
document.
5. How does the Offer compare with recent prices of Innogy Shares and Innogy
ADSs?
The Offer for Innogy Shares represents a premium of:
- - 31 per cent. to the Closing Price of an Innogy Share on 15 February 2002,
the last business day prior to the announcement by Innogy confirming that
it had received approaches which might or might not lead to an offer for
Innogy; and
- - 36 per cent. to the average Closing Price of an Innogy Share for one month
prior to that announcement.
2
The Closing Price of Innogy Shares and Innogy ADSs was:
- - on 15 February 2002: 210.25 pence per Innogy Share US$29.55 per Innogy ADS
- - on average for one
month prior to 15
February 2002: 202.08 pence per Innogy Share US$28.55 per Innogy ADS
See paragraph 3(c) of Appendix V to this document for the variation in the
prices of Innogy Shares and Innogy ADSs.
6. Do the Directors of Innogy support the Offer?
Yes. The Directors of Innogy, who have been so advised by Credit Suisse First
Boston and Deutsche Bank, consider the terms of the Offer to be fair and
reasonable. In providing advice to the Directors of Innogy, Credit Suisse First
Boston and Deutsche Bank have taken into account the commercial assessments of
the Directors of Innogy. The Directors of Innogy unanimously recommend that
holders of Innogy Securities accept the Offer, as they have undertaken to do in
respect of Innogy Shares held by them. See the letter from the Chairman of
Innogy in the next section of this document.
7. Does the Offeror have the financial resources to make payment?
Yes. The Offer will be financed from a combination of short-term financings and
existing liquid resources. The Offer is not conditional upon any financing
arrangements. See paragraph 10(c) of Appendix V to this document.
8. How long do I have to accept the Offer?
You will have until 3.00 p.m. (London time), 10.00 a.m. (New York City time), on
26 April 2002, to accept the Offer or withdraw your acceptance, unless the
Initial Offer Period is extended. In addition, you may accept the Offer but not
withdraw your acceptance during the Subsequent Offer Period except in the
limited circumstances described in paragraph 3 of Part B of Appendix I. If you
are a holder of Innogy ADSs and you cannot deliver everything that is required
in order to make a valid tender of Innogy ADSs by that time, you may be able to
use a Guaranteed Delivery Procedure, which is described later in this document.
See paragraph 13(c) of the letter from Merrill Lynch and paragraph 10 of Part B
of Appendix I to this document.
9. Until what time can I withdraw my acceptance?
The Initial Offer Period for acceptances and withdrawals is the period from the
date of this document until the time and date (not being before 3.00 p.m.
(London time), 10.00 a.m. (New York City time), on 26 April 2002 and not, except
with the consent of the Panel, being after 1.00 p.m. (London time), 8.00 a.m.
(New York City time) on 27 May 2002) on which all the Conditions are satisfied,
fulfilled or, to the extent permitted, waived or, if earlier, the time and date
on which the Offer lapses.
Unless the Offer has lapsed, the Subsequent Offer Period starts as soon as the
Initial Offer Period terminates. The Subsequent Offer Period must remain open
for at least 14 days but it may be extended beyond that time by the Offeror
until a further specified date or until further notice.
You can withdraw your acceptance during the Initial Offer Period but not during
the Subsequent Offer Period except in the limited circumstances described in
paragraph 3 of Part B of Appendix I. See paragraph 3 of Part B of Appendix I to
this document.
10. Can the Offer be extended and under what circumstances?
If all of the Conditions have not been either satisfied, fulfilled or, to the
extent permitted, waived by the Offeror by 3.00 p.m. (London time), 10.00 a.m.
(New York City time), on 26 April 2002, the Offeror may choose, but shall not be
obliged, to extend the Initial Offer Period. The Offeror may also be required to
extend the Initial Offer Period under applicable UK and US securities laws if it
changes the Offer in any material respect. The Initial Offer Period for
acceptances and withdrawals cannot be extended beyond 1.00 p.m. (London time),
8.00 a.m. (New York City time) on 27 May 2002 without the consent of the Panel.
3
Once all the Conditions have been either satisfied, fulfilled or, to the extent
permitted, waived by the Offeror, it will extend the Offer for a Subsequent
Offer Period of at least 14 days. See paragraph 1 of Part B of Appendix I to
this document.
11. How will I be notified if the Offer is extended?
If the Offeror extends the Offer, it will make a public announcement of the
extension not later than 8.00 a.m. (London time) in the United Kingdom, and 8.00
a.m. (New York City time) in the United States, on the next business day after
the day on which the Offer was scheduled to expire. See paragraph 2 of Part B of
Appendix I to this document.
The Offeror will also announce by not later than 8.00 a.m. (London time) in the
United Kingdom, and 8.00 a.m. (New York City time) in the United States, on the
business day following the end of the Initial Offer Period that there will be a
Subsequent Offer Period. The Subsequent Offer Period will remain open for at
least 14 days but the Offeror may extend it beyond that time until a further
specified date or until further notice.
12. What are the most significant conditions to the Offer?
Unless it has received valid acceptances (which have not been properly
withdrawn) in respect of at least 90 per cent. of the Innogy Shares (including
Innogy Shares represented by Innogy ADSs) to which the Offer relates, the
Offeror is not obliged to purchase any Innogy Shares and/or Innogy ADSs. This
percentage may be reduced at the discretion of the Offeror, subject to certain
limits. At least five US business days prior to any reduction, the Offeror will
announce that it may do this through a press release and an advertisement in a
newspaper with general circulation in the United States.
The Offeror is not obliged to purchase any Innogy Shares and/or Innogy ADSs if,
among other things, the European Commission has not indicated, in terms
reasonably satisfactory to the Offeror, that it does not intend to initiate an
in-depth investigation, or the applicable waiting period under the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976 has not expired or been
terminated.
See Part A of Appendix I to this document.
13. How do I withdraw my acceptance?
To withdraw an acceptance in relation to the Offer for Innogy Shares or Innogy
ADSs, you must deliver a written notice of withdrawal with the required
information to the Receiving Agent or the Depositary, as applicable, while you
still have the right to withdraw the Innogy Shares or Innogy ADSs. See paragraph
3 of Part B of Appendix I to this document.
14. Will the Offer be followed by a compulsory acquisition?
If all of the Conditions to the Offer are either satisfied, fulfilled or, where
permitted, waived and the Offeror has acquired 90 per cent. in nominal value of
Innogy Shares (including Innogy Shares represented by Innogy ADSs) within the
statutory time period, then the Offeror will be entitled to and intends to
acquire all remaining Innogy Shares and Innogy ADSs pursuant to the Companies
Act. Innogy Shareholders and holders of Innogy ADSs subject to the compulsory
acquisition would be offered the same consideration as those Innogy Shareholders
and holders of Innogy ADSs who accept the Offer. See paragraph 7(c) of Part B of
Appendix I to this document.
15. If I decide not to accept, how will the Offer affect my securities?
If the Offeror is able to, it will acquire all Innogy Shares (including Innogy
Shares represented by ADSs) for which it has not received acceptances pursuant
to the compulsory acquisition provisions of the Companies Act. The Offeror also
intends to procure the making of an application by Innogy for the removal of
Innogy Shares from the Official List and for the cancellation of trading in
Innogy Shares on the London Stock Exchange's market for listed securities. It is
anticipated that cancellation of listing and trading will take effect no earlier
than 20 business days after the Offer becomes or is declared unconditional in
all respects. The Offeror also intends to procure that Innogy applies for
de-listing of the Innogy ADSs from the New York Stock Exchange. Such de-listings
and cancellation would significantly reduce the liquidity and marketability
4
of any Innogy Securities not tendered in the Offer. The Offeror may also request
that Innogy terminate the existing deposit agreement through which the ADS
programme is operated. See paragraph 12 of Appendix V to this document.
16. Can I choose the currency of the cash that I receive?
If you accept the Offer for Innogy Shares, you will receive the price for your
shares in pounds sterling.
If you accept the Offer for Innogy ADSs, you will receive the price for your
ADSs in US dollars unless you specifically elect to receive it in pounds
sterling.
Where you are receiving US dollars, the cash amount payable in pounds sterling
to which you would otherwise be entitled pursuant to the terms of the Offer will
be converted, without charge, from pounds sterling to US dollars at the exchange
rate obtainable on the spot market in London at approximately noon (London time)
on the date the cash consideration is made available by the Offeror to the
Depositary for delivery in respect of your Innogy ADSs. The actual amount of US
dollars received will depend upon the exchange rate prevailing on the day on
which funds are made available to the Depositary by the Offeror.
See paragraph 15 of the letter from Merrill Lynch and paragraph 10 of Part B of
Appendix I to this document.
17. Will I have to pay any fees or commissions?
If you are the registered owner of your Innogy Shares and/or Innogy ADSs and you
accept the Offer, you will not have to pay brokerage fees or similar expenses.
If you own your Innogy Shares and/or Innogy ADSs through a broker or other
nominee, and your broker accepts the Offer on your behalf, your broker or
nominee may charge you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply.
18. Will I be taxed on the cash that I receive?
For UK tax purposes, a UK resident holder who accepts the Offer and elects for
the cash consideration will generally realise an immediate chargeable gain or
allowable loss if the Offer becomes unconditional.
For US federal income tax purposes, a US Holder will generally recognise a
capital gain or loss on the exchange of Innogy Shares or Innogy ADSs in an
amount equal to the difference between the US Holder's tax basis in its Innogy
Shares or Innogy ADSs and the offer consideration valued in US dollars. A US
Holder may also recognise an exchange gain or loss due to currency fluctuations.
Further information regarding the application of both US and UK tax laws to
holders of Innogy Securities who accept the Offer is set out in paragraphs 6 and
7 of Appendix V to this document.
19. Is there an alternative to cash consideration for my Innogy Securities?
As part of the Offer, Innogy Shareholders who are eligible to do so may elect to
receive some or all of their consideration in Loan Notes. For UK tax purposes,
the effect of electing for the Loan Note Alternative should be to allow eligible
Innogy Shareholders to defer any taxable gain arising on a disposal of their
Innogy Shares until such time as the Loan Notes are transferred or redeemed.
Such tax treatment is not available for the Loan Note Alternative under US
federal income tax laws and the Loan Note Alternative is not available to Innogy
Shareholders who are US persons or persons resident in Australia, Canada or
Japan. The Loan Note Alternative is also not available to holders of Innogy
ADSs.
20. Who can answer questions I might have about the Offer?
If you have any questions about procedures for acceptance of the Offer, you
should contact the Helpline on one of the following numbers:
o From the UK*: 0845 300 2527
o From the US: 866 867 1144
o From other countries: +44 20 7335 7287
*Calls charged at local rate
5
Letter from the Chairman of Innogy Holdings plc
[LOGO] Innogy
Innogy Holdings plc
Registered in England and Wales No. 3987817
Registered office:
Windmill Hill Business Park
Whitehill Way
Swindon SN5 6PB
28 March 2002
To holders of Innogy Shares and Innogy ADSs and, for information only, to
participants in the Innogy Share Incentive Plans
Dear Shareholder or ADS holder,
Recommended Cash Offer on behalf of RWE AG for Innogy Holdings plc
The boards of RWE and Innogy announced on 22 March 2002 that they had reached
agreement on the terms under which the business of Innogy will be combined with
RWE by way of a recommended cash offer which is to be made by a subsidiary of
RWE and (outside the United States) by Merrill Lynch on its behalf for the
entire issued and to be issued share capital of Innogy. This letter sets out the
background to the Offer and the reasons why your directors are unanimously
recommending that you accept it.
The Offer
The Offer, which is subject to the Conditions and Further Terms set out in
Appendix I to this document and in the accompanying Acceptance Forms, is
contained in the letter from Merrill Lynch which follows this letter, and is
being made on the following basis:
for each Innogy Share 275 pence in cash
for each Innogy ADS 2,750 pence in cash
The Offer values the existing issued share capital of Innogy at approximately
(pound)3.1 billion (EUR5.0 billion). RWE estimates that Innogy's net debt at
closing will be approximately (pound)2.1 billion (EUR3.4 billion)*. The total
enterprise value under the Offer (including option adjustments) is approximately
(pound)5.2 billion (EUR8.5 billion).
* Innogy's latest published net debt as at 30 September 2001 was
approximately (pound)2.4 billion (EUR3.8 billion). RWE's estimate of net
debt at closing excludes any movement from operational cash flow from 31
March 2002 until closing.
The Offer represents a premium of approximately:
o 31 per cent. to the Closing Price of 210.25 pence per Innogy Share on 15
February 2002, the last business day prior to the announcement by Innogy
confirming that it had received approaches which might or might not lead to
an offer for Innogy; and
o 36 per cent. to the average Closing Price for the one month prior to that
announcement.
In light of the Offer, the board of Innogy has agreed not to declare a final
dividend for the year ending 31 March 2002.
6
Loan Note Alternative
As an alternative to some or all of the cash consideration of 275 pence per
Innogy Share which they would otherwise receive under the Offer, Innogy
Shareholders (other than certain overseas shareholders) who validly accept the
Offer will be able to elect to receive Loan Notes. The Loan Note Alternative
will be made available on the following basis:
for every(pound)1 in cash consideration (pound)1 nominal of Loan Notes
A summary of the terms of the Loan Note Alternative is set out in the letter
from Merrill Lynch and further details of the Loan Notes are set out in Appendix
II to this document. The Loan Notes are to be issued by the Offeror and
guaranteed by RWE.
Information on the Innogy Group
Innogy is a leading integrated UK energy company created in October 2000 from
the demerger of the domestic UK energy business of the former National Power
PLC. In 2001, Innogy acquired the electricity supply businesses of Yorkshire
Electricity Group plc and Northern Electric plc to become the largest UK
electricity supplier and the second largest UK gas supplier. It now comprises:
o npower - a leading UK energy services company with over 6.8 million
customer accounts;
o a trading and asset management business with a 10 per cent. share of UK
electricity generation and a leading energy trading capability;
o an international operations and engineering business;
o National Wind Power - the UK's leading wind power business; and
o Regenesys - a new proprietary technology energy storage system suited to
many different applications on power systems.
For the year ended 31 March 2001, Innogy reported proforma net income of
(pound)217 million (EUR351 million) on net sales of (pound)3,859 million
(EUR6,236 million).
Current Trading
Innogy announced its interim results for the six months ended 30 September 2001
on 29 November 2001. These results outlined turnover of (pound)1,562 million
(EUR2,524 million) (restated proforma for the six months ended 30 September
2000: (pound)1,262 million; EUR2,039 million) and profit before interest, tax
and exceptionals of (pound)108 million (EUR175 million) (proforma 2000:
(pound)88 million; EUR142 million). Subsequently, Innogy has continued to
experience strong demand for its services with the business trading in line with
the Directors of Innogy's expectations.
Background to and Reasons for the Offer
Since its demerger from National Power PLC in October 2000, Innogy has built
itself into a leading UK integrated energy company. Innogy's business combines
8.7 GW of flexible and well-located main generation capacity with a leading
energy trading and risk management capability and a customer base of over 6.8
million accounts. Through the successful implementation of a clear strategy,
management has built a strong reputation and created a good platform for growth,
both in its integrated energy business and in its innovative Regenesys energy
storage business.
RWE is one of Europe's largest electricity and gas companies. The Directors of
Innogy believe that, through the combination with RWE, Innogy's prospects will
be strengthened. The Directors of Innogy also believe that the Offer of 275
pence per Innogy Share provides Innogy Shareholders with the most certain and
favourable opportunity to realise their investment at an attractive price.
Accordingly, the Directors of Innogy have unanimously agreed to recommend the
Offer to Innogy Shareholders.
7
Management and Employees
The Management Board of RWE has confirmed to the board of Innogy that the
existing rights, including pension rights, of all employees of the Innogy Group
will be fully safeguarded.
RWE's UK energy trading and supply activities will be combined with Innogy's
business to create Innogy, part of the RWE Group. Overall risk management will
be integrated in the RWE headquarters. The headquarters of Innogy will remain in
Swindon, United Kingdom. The Chief Executive of Innogy, Dr. Brian Count, will
report directly to Dr. Dietmar Kuhnt, Chairman of the Management Board of RWE.
Upon the Offer becoming or being declared unconditional in all respects, my
fellow non-executive directors of Innogy and Iintend to resign from the board of
Innogy.
Innogy Share Incentive Plans
The Offer (subject to compliance with any applicable local laws) extends to any
Innogy Shares issued fully paid (or credited as fully paid) or unconditionally
allotted or issued while the Offer remains open for acceptance (or such earlier
date as RWE may, subject to the City Code, determine, not being earlier than the
date on which the Offer becomes unconditional as to acceptances), including
Innogy Shares issued pursuant to the Innogy Share Incentive Plans. The Offer
extends to the Innogy Shares held in the Innogy Employee Share Trust and the
Innogy Shares held in the Innogy Profit Sharing Trust. If the Offer becomes or
is declared wholly unconditional, appropriate proposals will (subject to
compliance with and to the extent permitted by any applicable local laws) be
made to the holders of options and awards under the Innogy Share Incentive
Plans.
Action to be Taken to Accept the Offer
Your attention is drawn to the letter from Merrill Lynch, the Appendices to this
document and the accompanying Form of Acceptance or (if you are a holder of
Innogy ADSs) Letter of Transmittal. The procedure for acceptance of the Offer in
relation to Innogy Shares is set out in paragraph 13 of the letter from Merrill
Lynch and in the Form of Acceptance or (if you are a holder of Innogy ADSs)
Letter of Transmittal.
A separate step-by-step guide on how to fill in your form of acceptance has been
enclosed with this document.
If you are a holder of Innogy Shares, in order to accept the Offer, you should
complete and return the accompanying Form of Acceptance, whether or not your
Innogy Shares are in CREST, in accordance with the instructions thereon as soon
as possible and, in any event, so as to be received by post or by hand (during
normal business hours only) by the Receiving Agent at Antholin House, 71 Queen
Street, London EC4N 1SL by no later than 3.00 p.m. (London time) on 26 April
2002.
If you require further assistance on how to complete the Form of Acceptance,
please call the Helpline. Please note that the Helpline will be unable to advise
you on whether or not to accept the Offer or whether you should elect for the
Loan Note Alternative.
Your decision as to whether or not to accept to receive cash or Loan Notes will
depend on your individual circumstances, including your tax position. Paragraphs
6 and 7 of Appendix V to this document sets out certain implications of
acceptance of the Offer in relation to United Kingdom, German and United States
taxation. If you are in any doubt about the action you should take, you should
immediately consult your stockbroker, bank manager, solicitor, accountant or
other independent financial adviser, duly authorised under the Financial
Services and Markets Act 2000, if you are resident in the United Kingdom or, if
not, another appropriately authorised independent financial adviser.
If you are a holder of Innogy ADSs, in order to accept the Offer you should
complete the Letter of Transmittal in accordance with paragraph 13(c) of the
letter from Merrill Lynch.
8
Recommendation
The Directors of Innogy, who have been so advised by Credit Suisse First Boston
and Deutsche Bank, consider the terms of the Offer to be fair and reasonable. In
providing advice to the Directors of Innogy, Credit Suisse First Boston and
Deutsche Bank have taken into account the commercial assessments of the
Directors of Innogy.
The Directors of Innogy unanimously recommend that you accept the Offer, as they
have undertaken to do in respect of Innogy Shares held by them representing, in
aggregate, 87,661 issued Innogy Shares.
Yours sincerely
/s/ Ross Sayers
Ross Sayers
Chairman
9
Letter from Merrill Lynch
[LOGO] Merrill Lynch
Merrill Lynch International
Registered in England (No: 2312079)
Registered Office: 25 Ropemaker Street, London, EC2Y 9LY
A Subsidiary of Merrill Lynch & Co., Inc., Delaware, U.S.A.
Regulated by The Financial Services Authority Limited
Member of the London Stock Exchange plc
To holders of Innogy Shares and Innogy ADSs and, for information only, to
participants in the Innogy Share Incentive Plans
28 March 2002
Dear Shareholder or ADS holder,
RECOMMENDED CASH OFFER FOR INNOGY
1 Introduction
This letter contains the formal Offer made by the Offeror, which is a subsidiary
of RWE, and (outside the United States) by Merrill Lynch on its behalf. The
Offer and this document are subject to the applicable requirements of both the
City Code and US federal securities laws, subject to customary exemptions
granted by the SEC in relation to the Offer.
Your attention is drawn to the letter from the Chairman of Innogy, from which
you will see that the Directors of Innogy, who have been so advised by CSFB and
Deutsche Bank, consider the terms of the Offer to be fair and reasonable. In
providing advice to the Directors of Innogy, CSFB and Deutsche Bank have taken
into account the commercial assessments of the Directors of Innogy. The
Directors of Innogy unanimously recommend holders of Innogy Shares and Innogy
ADSs to accept the Offer as they intend to do in respect of Innogy Shares held
by them.
2 The Offer
The Offeror and (outside the United States) Merrill Lynch on behalf of the
Offeror hereby offer to acquire all of the Innogy Shares and Innogy ADSs on the
following basis:
for each Innogy Share 275 pence in cash
for each Innogy ADS 2,750 pence in cash
The Innogy Shares and Innogy ADSs which are the subject of the Offer will be
acquired by the Offeror pursuant to the Offer fully paid and free from all
liens, charges, equitable interests, third party rights and interests and
encumbrances and together with all rights now or hereafter attaching thereto,
including the right to receive all dividends and other distributions (if any)
declared, made or paid after the date of the announcement of the Offer.
The Offer extends to any Innogy Shares which are unconditionally allotted or
issued prior to the date on which the Offer closes (or such earlier date, not
being earlier than the date on which the Offer becomes or is declared wholly
unconditional, as the Offeror may, subject to the City Code, decide) as a result
of the exercise of options or rights granted under the Innogy Share Incentive
Plans or otherwise, as described further in paragraph 9(b) below.
10
The Offer (including the Loan Note Alternative) is subject to the Conditions and
Further Terms set out in Appendix I to this document and the Acceptance Forms.
If you are an Innogy Shareholder, to accept the offer you should return the Form
of Acceptance, together with all other required documents (such as your share
certificate(s)), as soon as possible and, in any event, so as to be received by
the Receiving Agent by no later than 3.00 p.m. (London time) on 26 April 2002.
The procedure for acceptance of the offer if you are an Innogy Shareholder is
set out in paragraph 13 ("Procedure for Acceptance of the Offer") below and in
paragraph 8 of Part B of Appendix I to this document, and in the accompanying
Form of Acceptance.
In addition, a separate step-by-step guide to completing the Form of Acceptance
has been sent to you with this document.
If you are a holder of Innogy ADSs, you should follow the instructions set out
in paragraph 13(c) below and in paragraph 10 of Part B of Appendix I to this
document.
3 Loan Note Alternative
Innogy Shareholders (other than certain overseas shareholders) who validly
accept the Offer will be able to elect to receive Loan Notes instead of some or
all of the cash to which they would otherwise become entitled under the terms of
the Offer. The Loan Note Alternative is being made available on the following
basis:
for every (pound)1 in cash consideration (pound)1 nominal of Loan Notes
The Loan Notes, which will be governed by English law, will be unsecured and
will be issued credited as fully paid in amounts and integral multiples of
(pound)1 nominal value. All fractional entitlements to the Loan Notes will be
disregarded. No application will be made for the Loan Notes to be issued or
dealt in on any stock exchange but they will be transferable subject to certain
restrictions to be set out in the instrument constituting the Loan Notes.
The Loan Notes will carry interest at 0.5 per cent. below six month GBP LIBOR
(as described in paragraph 2 of Appendix II). Interest will be payable by
half-yearly instalments in arrears (less any tax) on 10 January and 10 July in
each year. The first payment of interest will be made on the date (the "First
Payment Date"), which is the first 10 January or 10 July to fall on or after the
date which is six months after the first date of issue of any of the Loan Notes.
On the First Payment Date, interest will be paid in respect of the period from
(and including) the first date of issue of any of the Loan Notes to (but
excluding) the First Payment Date. The Loan Notes will be redeemable in whole or
in part for cash at the option of Noteholders on the First Payment Date and
subsequent interest payment dates. No Loan Notes may be redeemed before the
First Payment Date. In certain circumstances (set out in the instrument
constituting the Loan Notes), RWE will have the right to redeem all of the Loan
Notes. The final redemption date will be 10 January 2008. The Loan Notes will be
guaranteed by RWE.
No Loan Notes will be issued unless, on or before the date on which the Offer
becomes or is declared unconditional in all respects, valid elections have been
received in respect of at least (pound)5 million in nominal value of Loan Notes.
If insufficient elections are received, Innogy Shareholders electing for the
Loan Note Alternative will instead receive cash in accordance with the terms of
the Offer.
Subject as aforesaid, the Loan Note Alternative will remain open for acceptance
for so long as the Offer remains open for acceptance. The Loan Note Alternative
will be conditional upon the Offer becoming or being declared unconditional in
all respects.
Merrill Lynch, financial adviser to RWE and the Offeror, has advised that based
on market conditions on 26 March 2002 (the last practicable date prior to the
posting of this document), in its opinion, if the Loan Notes had been in issue
on that date, the value of each (pound)1 nominal of Loan Notes would have been
approximately 99 pence.
11
Innogy Shareholders and holders of Innogy ADSs who are not resident in the
United Kingdom should refer to paragraph 12 below and paragraph 10 of Part B of
Appendix I.
4 Background to and Reasons for the Offer
The Directors of RWE believe that the acquisition of Innogy has compelling
strategic rationale. It represents RWE's largest international energy investment
and a further important step in RWE's international multi-utility development
strategy.
Through the merger with VEW AG, the acquisition of Thames Water and the pending
acquisitions of American Water Works Company, Inc. and Transgas, a.s., RWE has
already made significant progress in the implementation of its multi-utility
strategy. In particular, with the acquisition of Thames Water, RWE has
successfully acquired and developed a leading position in the UK and
international water markets and the financial benefits of this combination are
now being realised. The acquisition of Innogy affords RWE an equivalent position
in the UK energy market from which RWE has, until now, been largely absent.
Innogy's transformation
Over the last few years, Innogy has transformed itself into a leading UK
integrated energy company with a balanced position between generation and
supply. Innogy:
o has 8,713 MW of installed capacity in its main generation portfolio. These
stations benefit from a balanced fuel mix (including dual fuel capacity)
and their flexibility and southern location positions Innogy to be a winner
under NETA;
o is a leading player in the UK CHP sector and has developed an exciting
portfolio of renewable energy generation;
o is a major UK participant in the trading of electricity and fuels and has
an experienced trading team maximising value across its integrated
business;
o has the well-recognised, national brand of npower and, following the
acquisition of the Yorkshire Electricity Group plc and Northern Electric
plc supply businesses, has over 6.8 million customer accounts; and
o is developing a range of products and services aimed at its retail customer
base in telecoms, energy-related activities and financial services.
Innogy's management has proved itself to be highly successful in the UK market
and has developed a strong platform from which the business can be taken forward
as part of the RWE Group.
Substantial benefits
The Directors of RWE believe that significant benefits will accrue to RWE from
the combination with Innogy.
o Multi-utility roll-out
- In the UK, Innogy complements RWE's existing position in the water
industry, held through Thames Water. Together, Innogy and Thames Water
provide the best essential service customer platform in the UK,
encompassing the largest electricity, the largest water and the
second-largest gas customer bases.
- The Innogy management has been pursuing a strategy of extracting value
from its customer base by achieving scale, folding its regional brands
into the national npower brand, consolidating its billing and customer
care systems onto a new platform, cutting costs and launching new
products including telecoms and financial products. RWE will
wholeheartedly support this strategy.
12
o Other UK opportunities
- RWE believes that it will derive significant benefits from the
opportunities presented by the substantially enlarged customer base.
- Further benefit will be derived from the strengthened UK market
position. In particular, RWE expects to improve the procurement and
delivery of services in its UK operations.
- The integration of Innogy and RWE's UK trading and industrial and
commercial energy supply businesses will provide additional benefits.
o Transfer of experience from liberalised markets and exchange of best
practices
- Innogy's highly regarded management will play a leading role in RWE's
energy strategy, in the UK and elsewhere.
- Innogy provides customer skills to RWE that can be rolled out to RWE's
continental European energy customer base of some 13 million accounts
and across its existing UK customer base.
- RWE believes that there are mutual benefits through the transfer of
best practice around the Group. Innogy's experience in operating in
deregulated markets will also be of benefit, as well as its proven
transaction and integration experience.
The enlarged group will be the number one electricity supplier in both Germany
and the UK (the largest and third largest European markets, respectively),
consolidating RWE's top three electricity position in Europe. In this region,
RWE and Innogy together will be the second largest power generator and will be
the third largest electricity supplier by volume.
Earnings enhancement
The transaction is expected to be earnings per share accretive on a pre-goodwill
basis in the first full year following completion. ROCE (return on capital
employed), including goodwill, is expected to be above RWE's pre-tax electricity
cost of capital in the third full year of consolidation at the latest.*
*This statement should not be interpreted to mean that the earnings per RWE
share for the current or future financial years will necessarily match or exceed
the historical published earnings per RWE share.
5 Irrevocable Undertakings
RWE has received irrevocable undertakings to accept the Offer from the Directors
of Innogy in respect of Innogy Shares held by them representing, in aggregate,
87,661, currently issued Innogy Shares.
6 Information on the RWE Group
RWE is today one of the leading international multi-utility companies. Its core
businesses are electricity, gas, water, waste management and utility-related
services. Following its merger with VEW AG, the acquisition of Thames Water and
the pending acquisitions of American Water Works Company, Inc. and Transgas,
a.s., RWE will rank as number one in the German electricity market and number
three in Europe; number two in the German gas market and number five in Europe;
number three in the world for water; and number one in Germany for waste
management.
In the full financial year ended 30 June 2001, RWE generated sales of
(pound)38.9 billion (EUR62.9 billion). In the truncated financial half year
ended 31 December 2001, RWE Group's 162,340 employees generated sales of some
(pound)20.6 billion (EUR33.3 billion). Under the management of the Group's
holding company, major subsidiaries are responsible for market operations.
RWE expects the operating result for the current year to exceed the comparable
proforma figure for the 2001 calendar year. This will primarily be driven by a
further increase in results generated by core businesses.
13
7 Information on the Offeror
The Offeror was incorporated on 21 February 2002 and has its registered office
at Opernplatz 1, D-45128 Essen, Germany. The Offeror, a wholly-owned subsidiary
of RWE, has been formed for the purposes of making the Offer and has a nominal
share capital of EUR50,000. To date, the Offeror has engaged in no activities
other than those incidental to its organisation and the making of the Offer.
8 Information on the Innogy Group
Innogy is a leading integrated UK energy company created in October 2000 from
the demerger of the domestic UK energy business of the former National Power
PLC. In 2001, Innogy acquired the electricity supply businesses of Yorkshire
Electricity Group plc and Northern Electric plc to become the largest UK
electricity supplier and the second largest UK gas supplier. It now comprises:
o npower - a leading UK energy services company with over 6.8 million
customer accounts;
o a trading and asset management business with a 10 per cent. share of UK
electricity generation and a leading energy trading capability;
o an international operations and engineering business;
o National Wind Power - the UK's leading wind power business; and
o Regenesys - a new proprietary technology energy storage system suited to
many different applications on power systems.
For the year ended 31 March 2001, Innogy reported proforma net income of
(pound)217 million (EUR351 million) on net sales of (pound)3,859 million
(EUR6,236 million).
9 Employee Matters and Share Incentive Plans
(a) Management and Employees
The Management Board of RWE has confirmed to the board of Innogy that the
existing rights, including pension rights, of all employees of the Innogy
Group will be fully safeguarded.
RWE's UK energy trading and supply activities will be combined with
Innogy's business to create Innogy, part of the RWE Group. Overall risk
management will be integrated in the RWE headquarters. The headquarters of
Innogy will remain in Swindon, United Kingdom. The Chief Executive of
Innogy, Dr. Brian Count, will report directly to Dr. Dietmar Kuhnt,
Chairman of the Management Board of RWE.
(b) Innogy Share Incentive Plans
The Offer (subject to compliance with any applicable local laws) extends to
any Innogy Shares issued fully paid (or credited as fully paid) or
unconditionally allotted or issued while the Offer remains open for
acceptance (or such earlier date as RWE may, subject to the City Code,
determine, not being earlier than the date on which the Offer becomes
unconditional as to acceptances), including Innogy Shares issued pursuant
to the Innogy Share Incentive Plans. The Offer extends to the Innogy Shares
held in the Innogy Employee Share Trust and the Innogy Shares held in the
Innogy Profit Sharing Trust. If the Offer becomes or is declared wholly
unconditional, appropriate proposals will (subject to compliance with and
to the extent permitted by any applicable local laws) be made to the
holders of options and awards under the Innogy Share Incentive Plans.
10 Inducement Fee
As an inducement to RWE to make the Offer, RWE and Innogy have entered into a
letter agreement. Such letter agreement provides for (i) Innogy to pay to RWE a
fee of (pound)20 million (EUR32 million) if the Offer lapses or is withdrawn
following a competing offer and such competing offer becomes or is declared
unconditional in all respects; and (ii) RWE to pay to Innogy the same amount if
the Offer does not become or is not declared unconditional in all respects as a
result of the regulatory conditions to the Offer not being satisfied in certain
circumstances.
14
11 Taxation
(a) UK Taxation
Information on UK tax law and Inland Revenue practice applicable to holders
of Innogy Shares and Innogy ADSs who accept the Offer is contained in
paragraph 6 of Appendix V to this document.
Each holder of Innogy Shares and Innogy adss is urged to consult his
independent financial adviser immediately regarding the tax consequences of
acceptance of the Offer and/or election for the Loan Note Alternative.
(b) US Taxation
Information on certain US federal income tax consequences applicable to US
Holders of Innogy Shares and Innogy ADSs who accept the Offer is contained
in paragraph 7(a) of Appendix V to this document.
Each holder of Innogy Shares and Innogy adss is urged to consult his
independent financial adviser immediately regarding the tax consequences of
acceptance of the Offer.
(c) German Taxation
Information on German tax law which may be relevant to holders of Innogy
Shares or Innogy ADSs who elect for the Loan Note Alternative is set out in
paragraph 7(b) of Appendix V to this document.
Each holder of Innogy Shares and Innogy ADSs is urged to consult his
independent financial adviser immediately regarding the tax consequences of
acceptance of the Offer and/or election for the Loan Note Alternative.
12 Overseas Holders of Innogy Securities
The attention of holders of Innogy Securities who are citizens or residents of
jurisdictions outside the UK is drawn to paragraph 6 of Part B of Appendix I to
this document and to the relevant provisions of the Acceptance Forms.
The availability of the Offer to persons not resident in the UK or the US may be
affected by the laws of the relevant jurisdiction. Persons who are not resident
in the UK or the US should inform themselves about and observe any applicable
requirements.
The Offer in the United States is made solely by the Offeror, and neither
Merrill Lynch nor any of its affiliates is making the Offer in the United
States.
Unless otherwise determined by RWE and permitted by applicable law and
regulation, the Offer (including the Loan Note Alternative) is not being made,
directly or indirectly, in or into, Australia, Canada or Japan and, subject to
certain exemptions, the Offer is not capable of acceptance from or within
Australia, Canada or Japan. Accordingly, neither this document nor the Forms of
Acceptance are being or may be mailed or otherwise forwarded, distributed or
sent into or from Australia, Canada or Japan and doing so may render any
purported acceptance of the Offer invalid. All holders of Innogy Shares and
Innogy ADSs (including nominees, trustees or custodians) who may have a
contractual or legal obligation, or may otherwise intend, to forward this
document and/or the Acceptance Forms, should read the further details in this
regard which are contained in paragraph 6(c) of Part B of Appendix I to this
document before taking any action.
The Loan Notes which may be issued pursuant to the Loan Note Alternative have
not been, and will not be, listed on any stock exchange and have not been and
will not be registered under the US Securities Act or under any relevant laws of
any state or other jurisdiction of the United States, nor have the clearances
been, nor will they be, obtained from the securities commission or similar
authority of any province or territory of Canada and no prospectus has been or
will be filed, or registration made, under any securities law of any province or
territory of Canada, nor has a prospectus in relation to the Loan Notes been,
nor will one be, lodged with or registered by the Australian Securities and
Investments Commission nor have any steps been taken, nor will any steps be
taken, to enable the Loan Notes to be offered in compliance with applicable
securities laws of Japan. Accordingly, unless an exemption under relevant
securities laws is available, Loan
15
Notes may not be offered, sold, re-sold or delivered, directly or indirectly,
in, into or from the United States, Australia, Canada or Japan or any other
jurisdiction in which an offer of Loan Notes would constitute a violation of
relevant laws or require registration of the Loan Notes, or to or for the
account or benefit of any US person or resident of Australia, Canada or Japan or
any other such jurisdiction.
Notwithstanding the foregoing, RWE retains the right to permit the Offer to be
accepted and any sale of securities pursuant to the Offer to be completed if, in
its sole discretion, it is satisfied that the transaction in question can be
undertaken in compliance with applicable law and regulation.
13 Procedure for Acceptance of the Offer
(a) If you hold Innogy Shares in certificated form (i.e. if you hold a share
certificate)
(i) Completion of Form of Acceptance
You will find enclosed with this document a Form of Acceptance for use
in relation to the Offer. You should note that, if you hold Innogy
Shares in both certificated and uncertificated form, you should
complete a separate Form of Acceptance for each holding. If you hold
Innogy Shares in certificated form, but under different designations,
you should complete a separate Form of Acceptance in respect of each
designation. Further Forms of Acceptance can be obtained from the
Receiving Agent at Antholin House, 71 Queen Street, London, EC4N 1SL
or by telephoning the Helpline on 0845 300 2527 (if calling from the
UK), 866 867 1144 (if calling from the US) or +44 20 7335 7287 (if
calling from elsewhere).
Your completed Form(s) of Acceptance should be lodged with the
Receiving Agent at Antholin House, 71 Queen Street, London EC4N 1SL
together with the relevant share certificates, other documents(s) of
title, letters of indemnity and supporting documents (if any), as soon
as possible, but in any event so as to arrive not later than 3.00 p.m.
(London time) on 26 April 2002. A reply-paid envelope is enclosed for
your convenience.
The instructions printed on the Form of Acceptance shall be deemed to
form part of the terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in
Australia, Canada or Japan or otherwise appearing to the Offeror or
its agents to have been sent from Australia, Canada or Japan may be
rejected as an invalid acceptance of the Offer. For further
information for overseas Innogy Shareholders, see paragraph 12 of this
letter and paragraph 6 of Part B of Appendix I to this document.
(ii) To accept the Offer in respect of your Innogy Shares
To accept the Offer in respect of your Innogy Shares, you should
complete Box 2 of the Form of Acceptance. If you do not insert a
number in Box 2, your acceptance will be deemed to be in respect of
all the Innogy Shares held by you. You must sign Box 4 of the Form of
Acceptance in accordance with the instructions printed thereon. All
Innogy Shareholders who are individuals (as opposed to companies)
should sign Box 4 of the Form of Acceptance in the presence of a
witness, who should also sign Box 4 in accordance with the
instructions.
If you have any questions as to how to complete the Form of
Acceptance, please telephone the Helpline on 0845 300 2527 (if calling
from the UK), 866 867 1144 (if calling from the US) or +44 20 7335
7287 (if calling from elsewhere).
(iii) To elect for the Loan Note Alternative
To elect for the Loan Note Alternative in respect of some or all of
the Innogy Shares for which you are accepting the Offer, you should
complete Box 3 in addition to taking the actions described in
paragraph (i) above. The attention of those holders of Innogy Shares
considering accepting the Loan Note Alternative is drawn to paragraph
3 above, paragraph 4 of Part B of Appendix I and to Appendix II to
this document.
16
(iv) Share certificates not readily available or lost
Your completed, signed and (if appropriate) witnessed Form of
Acceptance should be accompanied by the relevant share certificate(s)
and/or other document(s) of title. If for any reason, your share
certificate(s) and/or other document(s) of title is/are not readily
available, you should nevertheless complete, sign and return your
completed Form of Acceptance as stated above. You should send with the
Form of Acceptance any share certificate(s) and/or other documents(s)
of title which you may have available, accompanied by a letter stating
that the remaining documents will follow or that you have lost one or
more of your share certificates and/or other documents of title and
such certificate(s) and/or other document(s) of title should be
forwarded as soon as possible thereafter.
If you have lost your share certificate(s) and/or other document(s) of
title, you should write to the Registrar at The Causeway, Worthing,
West Sussex, BN99 6DA for a letter of indemnity for lost share
certificate(s) and/or other document(s) of title which, when completed
in accordance with the instructions given, should be returned to the
Receiving Agent at Antholin House, 71 Queen Street, London, EC4N 1SL.
(b) If you hold Innogy Shares in uncertificated form
You are reminded that if you are a CREST sponsored member, you should
contact your CREST sponsor before taking any action.
(i) Completion of Form of Acceptance
You will find enclosed with this document a Form of Acceptance for use
in relation to the Offer. You should note that, if you hold Innogy
Shares in both certificated and uncertificated form, you should
complete a separate Form of Acceptance for each holding. If you hold
Innogy Shares in uncertificated form, but under different member
account IDs, you should complete a separate Form of Acceptance in
respect of each member account ID. Further Forms of Acceptance can be
obtained from the Receiving Agent at Antholin House, 71 Queen Street,
London, EC4N 1SL or by telephoning the Helpline on 0845 300 2527 (if
calling from the UK), 866 867 1144 (if calling from the US) or +44 20
7335 7287 (if calling from elsewhere).
Your completed Form(s) of Acceptance should be lodged with the
Receiving Agent at Antholin House, 71 Queen Street, London EC4N 1SL,
as soon as possible, but in any event so as to arrive not later than
3.00 p.m. (London time) on 26 April 2002. A reply-paid envelope is
enclosed for your convenience.
The instructions printed on the Form of Acceptance shall be deemed to
form part of the terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in
Australia, Canada or Japan or otherwise appearing to the Offeror or
its agents to have been sent from Australia, Canada or Japan may be
rejected as an invalid acceptance of the Offer. For further
information for overseas Innogy Shareholders, see paragraph 12 of this
letter and paragraph 6 of Part B of Appendix I to this document.
(ii) To accept the Offer in respect of your Innogy Shares
To accept the Offer in respect of your Innogy Shares you must complete
Box 2 of the Form of Acceptance and, as your Innogy Shares are in
CREST, Box 5 and, if appropriate, Boxes 6, 7 and 8. If you do not
insert a number in Box 2, your acceptance will be deemed to be in
respect of all the Innogy Shares held by you. In all cases you must
sign and date Box 4 of the Form of Acceptance in accordance with the
instructions printed thereon. All Innogy Shareholders who are
individuals (as opposed to companies) should sign Box 4 of the Form of
Acceptance in the presence of a witness, who should also sign Box 4 in
accordance with the instructions.
17
If you have any questions as to how to complete the Form of
Acceptance, please telephone the Helpline on 0845 300 2527 (if calling
from the UK), 866 867 1144 (if calling from the US) or +44 20 7335
7287 (if calling from elsewhere).
(iii) To elect for the Loan Note Alternative
To elect for the Loan Note Alternative in respect of some or all of
the Innogy Shares for which you are accepting the Offer, you should
complete Box 3 in addition to taking the actions described in
paragraphs (i) and (ii) above. The attention of those holders of
Innogy Shares considering accepting the Loan Note Alternative is drawn
to paragraph 3 above, paragraph 4 of Part B of Appendix I and to
Appendix II to this document.
(iv) Additional procedures for Innogy Shares held in uncertificated form
(that is, in CREST)
If your Innogy Shares are held in uncertificated form you should
insert in Box 5 of the enclosed Form of Acceptance the participant ID
and member account ID under which such Innogy Shares are held by you
in CREST and otherwise complete and return the Form of Acceptance as
described in (i), (ii) and (iii) above. In addition, you should take
(or procure to be taken) the action set out below to transfer the
Innogy Shares in respect of which you wish to accept the Offer to an
escrow balance (that is, a TTE Instruction), specifying the Receiving
Agent (in its capacity as a CREST participant under the Receiving
Agent participant ID referred to below) as the escrow agent, as soon
as possible and in any event so that the transfer to escrow settles
not later than 3.00 p.m. (London time) on 26 April 2002.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before taking any action. Your CREST sponsor will be able to
confirm details of your participant ID and the member account ID under
which your Innogy Shares are held. In addition, only your CREST
sponsor will be able to send the TTE Instruction to CRESTCo in
relation to your Innogy Shares.
You should send (or, if you are a CREST sponsored member, procure that
your CREST sponsor sends) a TTE Instruction to CRESTCo which must be
properly authenticated in accordance with CRESTCo's specifications and
which must contain, in addition to the other information that is
required for a TTE Instruction to settle in CREST, the following
details:
(a) the number of Innogy Shares to be transferred to an escrow
balance;
(b) your participant ID. This must be the same participant ID as the
participant ID that is inserted in Box 5 of the Form of
Acceptance;
(c) your member account ID. This must be the same member account ID
as the member account ID that is inserted in Box 5 of the Form of
Acceptance;
(d) the participant ID of Lloyds TSB Registrars, in its capacity as a
CREST receiving agent. This is 6RA66;
(e) the member account ID of Lloyds TSB Registrars. This is RA325801;
(f) the Form of Acceptance reference number. This is the reference
number that is shown next to Box 5 on page 3 of the Form of
Acceptance. This reference number should be inserted in the first
eight characters of the shared note field on the TTE Instruction.
Such insertion will assist Lloyds TSB Registrars in matching the
TTE to your Form of Acceptance. You should keep a separate record
of this Form of Acceptance reference number for future reference;
(g) the intended settlement date. This should be as soon as possible
and in any event not later than 3.00 p.m. (London time) on 26
April 2002;
(h) the Corporate Action Number for the Offer which is allocated by
CRESTCo and can be found by reviewing the relevant Corporate
Action Details in CREST; and
(i) input with Standard Delivery instruction of 80.
18
After settlement of the TTE Instruction, you will not be able to
access the Innogy Shares concerned in CREST for any transaction or
charging purposes. If the Offer becomes or is declared unconditional
in all respects, the escrow agent will transfer the Innogy Shares
concerned to itself in accordance with paragraphs 8 and 9 of Part B of
Appendix I.
You are recommended to refer to the CREST manual published by CRESTCo
for further information on the CREST procedures outlined above. For
ease of processing, you are requested, wherever possible to ensure
that a Form of Acceptance relates to only one transfer to escrow.
If no Form of Acceptance reference number, or an incorrect Form of
Acceptance reference number, is included on the TTE Instruction, the
Offeror may treat any amount of Innogy Shares transferred to an escrow
balance in favour of the escrow agent specified above from the
participant ID and member account ID identified in the TTE Instruction
as relating to any Form(s) of Acceptance which relate(s) to the same
member account ID and participant ID (up to the amount of Innogy
Shares inserted or deemed to be inserted on the Form(s) of Acceptance
concerned).
You should note that CRESTCo does not make available special
procedures in CREST for any particular corporate action. Normal system
timings and limitations will therefore apply in connection with a TTE
Instruction and its settlement. You should therefore ensure that all
necessary action is taken by you (or by your CREST sponsor) to enable
a TTE Instruction relating to Innogy Shares to settle prior to 3.00
p.m. (London time) on 26 April 2002. In this regard you are referred
in particular to those paragraphs of the CREST Manual concerning
practical limitations of the CREST system and timings.
The Offeror will make an appropriate announcement if any of the
details contained in this paragraph alter for any reason in any
respect that is material for Innogy Shareholders.
You are reminded that if you are a CREST sponsored member, you should
contact your CREST sponsor before taking any action.
(c) If you hold Innogy ADSs
The attention of holders of Innogy ADSs is drawn to paragraph 10 of Part B
of Appendix I to this document and to the relevant provisions of the Letter
of Transmittal.
For a holder of Innogy ADSs to validly accept the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), together with any other required signature
guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at the appropriate
address as set out in the Letter of Transmittal and either the Innogy
ADRs evidencing such Innogy ADSs must be received by the Depositary at
one of such addresses or such Innogy ADRs must be delivered pursuant
to the procedure for book-entry transfer set out in paragraph 10 of
Part B of Appendix I to this document (and a Book-Entry Confirmation
received by the Depositary in accordance with such procedures); or
(ii) such holder must comply with the guaranteed delivery procedures set
out in paragraph 10 of Part B of Appendix I to this document.
Acceptances using the guaranteed delivery procedures will not be taken into
account in determining whether the Acceptance Condition has been satisfied
unless the Innogy ADRs evidencing the Innogy ADSs or book-entry transfer of
the Innogy ADSs to which the guaranteed delivery procedures relate have
been received by the Depositary before the end of the Initial Offer Period.
If you hold Innogy ADSs and are in any doubt as to the procedure for
acceptance, please telephone the Helpline on 0845 300 2527 (if calling from
the UK), 866 867 1144 (if calling from the US) or +44 20 7335 7287 (if
calling from elsewhere).
19
(d) If you are the holder of Innogy Securities in any form whatsoever
(i) Validity of acceptances
Without prejudice to Part B of Appendix I to this document and subject
to the City Code, the Offeror reserves the right to treat as valid in
whole or in part any acceptance of the Offer which is not entirely in
order or which is not accompanied by (as applicable) the relevant
transfer to escrow or the relevant share certificate(s), Innogy ADRs
and/or other document(s) of title or which is received in a form or at
a place or places other than as set out in this document or on the
relevant Acceptance Form. In that event, no payment of cash or Loan
Notes under the Offer will be required to be made until after the
acceptance is entirely in order to the Offeror's satisfaction and (as
applicable) the relevant transfer to escrow has been settled or the
relevant share certificate(s), Innogy ADRs and/or other document(s) of
title or indemnities satisfactory to the Offeror have been received
by, the Receiving Agent or the Depositary, as appropriate.
(ii) No acknowledgement
No acknowledgement of receipt of Acceptance Form(s), Innogy share
certificates, Innogy ADRs or other documents of title or documentation
in respect of the Offer will be given by, or on behalf of, the
Offeror.
14 Rights of Withdrawal
Except to the extent of the exemptive relief which has been granted by the SEC,
the Offer is subject to the US tender offer rules applicable to securities
registered under the Exchange Act, as well as to the City Code. This has
necessitated a number of changes from the procedures which normally apply to
offers for companies governed by the City Code, including those applicable to
the rights of holders of Innogy Shares and Innogy ADSs to withdraw their
acceptance of the Offer.
Under the Offer, holders of Innogy Shares and Innogy ADSs will be able to
withdraw their acceptances at any time during the Initial Offer Period but will
not have any withdrawal rights during the Subsequent Offer Period, except in
certain limited circumstances (see paragraph 3 of Part B of Appendix I to this
document). The Subsequent Offer Period must remain open for at least 14 days but
may be extended beyond that time until a further specified date or until further
notice.
The Offer will be deemed not to have been validly accepted in respect of any
Innogy Shares or Innogy ADSs acceptances in respect of which have been validly
withdrawn. However, the Offer may be accepted again in respect of any withdrawn
Innogy Shares or Innogy ADSs by following one of the procedures described in
paragraph 13 of this letter at any time prior to expiry or lapse of the Offer.
It should be noted that by virtue of the conflicting provisions of the City Code
and US federal securities laws, the Panel has agreed that the Acceptance
Condition can be structured so that the Offer cannot become or be declared
unconditional as to acceptances until such time as all other Conditions to the
Offer have been satisfied, fulfilled or, to the extent permitted, waived. The
Acceptance Condition in paragraph (a) of Part A of Appendix I to this document
reflects this.
Further details of these rights of withdrawal and the procedure for effecting
withdrawals are set out in paragraph 3 of Part B of Appendix I to this document.
15 Settlement
(a) Date of Payment
The settlement procedure with respect to the Offer will be consistent with
UK practice, which differs from US domestic tender offer procedures in
certain material respects, particularly with regard to the date of payment.
Subject to either the satisfaction, fulfilment or, to the extent permitted,
waiver of all of the Conditions, settlement of consideration to accepting
Innogy Shareholders and accepting holders of Innogy ADSs or their
designated agents will be effected in the manner set out below:
20
(i) in the case of acceptances received, complete in all respects, by the
end of the Initial Offer Period, within 14 calendar days of such date;
or
(ii) in the case of acceptances received complete in all respects after
such date but while the Offer remains open for acceptance, within 14
calendar days of such receipt.
(b) Innogy Shares held in uncertificated form (that is, in CREST)
Where an acceptance relates to Innogy Shares held in uncertificated form,
(i) the cash consideration to which an accepting Innogy Shareholder is
entitled will be paid by means of CREST by the Offeror procuring the
creation of an assured payment obligation in favour of the accepting Innogy
Shareholder's payment bank in respect of the cash consideration due, in
accordance with the CREST assured payment arrangements and (ii) definitive
certificates for any Loan Notes will be despatched by post (or by such
other method as may be approved by the Panel). No Loan Note certificates
will be despatched to addresses in the United States, Australia, Canada or
Japan.
The Offeror reserves the right to settle all or any part of the cash
consideration referred to above, for all or any accepting Innogy
Shareholder(s), in the manner referred to in paragraph (c) below, if, for
any reason, it wishes to do so.
(c) Innogy Shares and Innogy ADSs held in certificated form
Where an acceptance relates to Innogy Shares or Innogy ADSs held in
certificated form, cheques drawn on a UK clearing bank in pounds sterling
or US dollars, as appropriate, for the cash due and, where applicable,
definitive loan note certificates for the appropriate nominal amount of any
Loan Notes will be despatched by post (or by such other method as may be
approved by the Panel). No Loan Note certificates will be despatched to
addresses in the United States and no payments or Loan Note certificates
will be despatched to addresses in Australia, Canada or Japan.
(d) Lapsing of the Offer
During the Initial Offer Period, if by the Closing Date the Conditions are
not satisfied, fulfilled or, to the extent permitted, waived, the Offer
will lapse. If the Offer lapses then: (i) in respect of Innogy Shares held
in certificated form and Innogy ADSs, the relevant share certificate(s),
Innogy ADRs and/or other documents of title will be returned by post (or by
such other method as may be approved by the Panel) within 14 calendar days
of the Offer lapsing to the person or agent whose name and address (outside
Australia, Canada or Japan) is set out in Box 1 (or, if applicable, Box 7)
of the Form of Acceptance or to the person or agent whose name and address
(outside Australia, Canada or Japan) is set out in the Letter of
Transmittal (as applicable) or, if none is set out, to the name and address
of the person who is the first named holder at his or her registered
address; (ii) in respect of Innogy Shares held in uncertificated form (that
is, in CREST), the Receiving Agent will, immediately after the lapsing of
the Offer (or within such longer period as the Panel may permit, not
exceeding 14 calendar days after the lapsing of the Offer), give transfer
from escrow instructions to CRESTCo to transfer all relevant Innogy Shares
held in escrow balances and in relation to which it is the escrow agent for
the purposes of the Offer to the original available balances of the holders
of Innogy Shares concerned; and (iii) in respect of Innogy ADSs delivered
by book-entry transfer into the Depositary's account at a Book-Entry
Transfer Facility, Innogy ADSs will be credited to an account maintained at
the appropriate Book-Entry Transfer Facility.
(e) General
All documents and remittances sent by, to or from holders of Innogy Shares
and Innogy ADSs or their appointed agents will be sent at their own risk.
(f) Currency of cash consideration
Holders of Innogy ADSs are entitled under the terms of the Offer to receive
the cash consideration in pounds sterling. The pounds sterling
consideration available to holders of Innogy ADSs is the same, per Innogy
Share, as that offered to Innogy Shareholders. To facilitate the settlement
of the Offer,
21
unless they elect to receive pounds sterling, holders of Innogy ADSs will
receive consideration converted into US dollars at the exchange rate
obtainable on the spot market in London at approximately noon (London time)
on the date the cash consideration is made available by the Offeror to the
Depositary for delivery in respect of the relevant Innogy ADSs.
A holder of Innogy ADSs may receive such amount on the basis set out above
only in respect of the whole of his holding of Innogy Shares in respect of
which he accepts the Offer. Holders of Innogy ADSs may not elect to receive
both pounds sterling and US dollars.
If you are a holder of Innogy ADSs and you wish to elect to receive cash
consideration in pounds sterling instead of US dollars under the Offer, you
should complete the Box entitled "Pounds Sterling Payment Election" on the
Letter of Transmittal in addition to taking the actions described in
paragraph 13(c) above.
The actual amount of US dollars received will depend upon the exchange rate
prevailing on the day on which funds are made available to the Depositary
by the Offeror. Holders of Innogy ADSs should be aware that the US
dollar/pound sterling exchange rate which is prevailing on the date on
which an election is deemed to be made to receive US dollars and on the
dates of despatch and receipt of payment may be different from that
prevailing on the day on which funds are made available to the Depositary
by the Offeror. In all cases, fluctuations in the US dollar/pounds sterling
exchange rate are at the risk of accepting holders of Innogy ADSs who are
treated as having elected to receive their consideration in US dollars.
None of RWE, the Offeror and their advisers or agents shall have any
responsibility with respect to the actual amount of cash consideration
payable other than in pounds sterling.
16 Further Information
Your attention is drawn to the further information contained in the appendices
which form part of this document, and to the accompanying Acceptance Forms,
which should be read in conjunction with this document. The appendices and the
Acceptance Forms contain material information which may not be summarised
elsewhere.
17 Action to be Taken
If you wish to accept the Offer you are urged to complete, sign and return the
Form of Acceptance or, if you are a holder of Innogy ADSs, the Letter of
Transmittal (as appropriate), together with all the documents required to be
returned with it, as soon as possible and, in any event, so as to be received by
the Receiving Agent, or the Depositary, as appropriate, by no later than 3.00
p.m. (London time) on 26 April 2002.
Yours faithfully
R.H.C. Nourse
Managing Director
For and on behalf of
Merrill Lynch International
22
APPENDIX I
Conditions and Further Terms of the Offer
The Offer, which is being made by the Offeror and (outside the United States) by
Merrill Lynch on its behalf, complies with the applicable rules and regulations
of the City Code and with the Exchange Act. In addition, the Offer is governed
by English law and is subject to the jurisdiction of the courts of England and
is being made on the terms and conditions set out herein and in the related
Acceptance Forms.
Part A: Conditions of the Offer
The Offer is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
3.00 p.m. (London time), 10.00 a.m. (New York City time) on 26 April 2002
or such later time(s) and/or date(s) as the Offeror may, subject to the
City Code and in accordance with the Exchange Act, decide in respect of not
less than 90 per cent. (or such lesser percentage as the Offeror may
decide) of the Innogy Shares (including Innogy Shares represented by Innogy
ADSs) to which the Offer relates, provided that this condition will not be
satisfied unless RWE and its wholly-owned subsidiaries shall have acquired,
or agreed to acquire, pursuant to the Offer or otherwise, Innogy Shares
(including Innogy Shares represented by Innogy ADSs) carrying in aggregate
more than 50 per cent. of the voting rights normally exercisable at a
general meeting of Innogy, including for this purpose (to the extent, if
any, required by the Panel) any voting rights attaching to any Innogy
Shares (including Innogy Shares represented by Innogy ADSs) that are
unconditionally allotted or issued before the Offer becomes or is declared
unconditional as to acceptances pursuant to the exercise of any outstanding
subscription or conversion rights or otherwise and for the purposes of this
condition:
(i) Innogy Shares (including Innogy Shares represented by Innogy ADSs)
which have been unconditionally allotted shall be deemed to carry the
voting rights they will carry on being entered in the register of
members of Innogy; and
(ii) the expression "Innogy Shares (including Innogy Shares represented by
Innogy ADSs) to which the Offer relates" shall be construed in
accordance with sections 428 to 430F of the Companies Act 1985,
provided further that, unless the Offeror otherwise determines, this
condition (a) shall be capable of being satisfied only at a time when all
of the other conditions (b) to (l) inclusive have been either satisfied,
fulfilled or, to the extent permitted, waived;
(b) (i) it being established, in terms reasonably satisfactory to the Offeror,
that it is not the intention of the European Commission to initiate
proceedings under Article 6(1)(c) of Council Regulation (EEC) No.
4064/89 (as amended by Council Regulation (EC) No. 1310/97) (the
"Regulation") or to make a referral to a competent authority under
Article 9(1) thereof in connection with the Acquisition or any part
thereof or any matter arising therefrom; or
(ii) if the European Commission makes a referral of the Acquisition or any
part thereof under Article 9(1) of the Regulation to the competent
authorities of the United Kingdom, or if the competent authorities of
the United Kingdom invoke Article 21(3) of the Regulation in respect
of the Acquisition or any part thereof:
(aa) it being established in terms reasonably satisfactory to the
Offeror that it is not the intention of the Secretary of State
for Trade and Industry to refer the Acquisition, or any part
thereof, or any matter arising therefrom, to the Competition
Commission; and
(bb) the requirements of condition (b)(i) above being satisfied with
respect to any part of the Acquisition not referred to a
competent authority of the United Kingdom.
23
(c) GEMA indicating in terms reasonably satisfactory to the Offeror that in
connection with the Acquisition it is not its intention to seek
modifications to any of the licences held by any member of the Wider Innogy
Group under the Electricity Act 1989 (except on terms reasonably
satisfactory to the Offeror) and neither Innogy nor any member of the Wider
Innogy Group having agreed to any such modifications (except, in each case,
on terms reasonably satisfactory to the Offeror);
(d) GEMA indicating in terms reasonably satisfactory to the Offeror that in
connection with the Acquisition it will not seek undertakings or assurances
from any member of the Wider RWE Group (except on terms reasonably
satisfactory to the Offeror) and that in connection with the Acquisition it
will seek or agree only such modifications (if any) and such other consents
and/or directions (if any) as are in the reasonable opinion of the Offeror
necessary or appropriate with respect to the licences referred to in
condition (c);
(e) all filings having been made and all applicable waiting periods under the
United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
regulations thereunder having expired or been terminated as appropriate in
each case in connection with the Offer and the proposed acquisition of any
shares in, or control of, Innogy by any member of the Wider RWE Group;
(f) notification having been received by the Offeror under section 215(2) of
the Income and Corporation Taxes Act 1988 that no payments made in
connection with the Offer will be treated as chargeable payments for the
purposes of section 214 of the Income and Corporation Taxes Act 1988;
(g) no government or governmental, quasi-governmental, supranational, statutory
or regulatory body or association or agency (including any trade agency) or
any court or other body (including any professional or environmental body)
or person in any jurisdiction (each a "Third Party") having decided to
take, instituted, implemented or threatened any action, proceeding, suit,
investigation or enquiry or enacted, made or proposed and there not
continuing to be outstanding any statute, regulation, order or decision
that would or might be reasonably expected to:
(i) make the Offer or the acquisition of any Innogy Shares, or control of
Innogy, by any member of the Wider RWE Group void, unenforceable or
illegal or directly or indirectly restrict, prohibit, delay or
otherwise interfere with the implementation of, or impose additional
conditions or obligations with respect to, or otherwise challenge, the
Offer or the acquisition of any Innogy Shares, or control of Innogy,
by any member of the Wider RWE Group;
(ii) require, prevent or delay the divestiture (or alter the terms of any
proposed divestiture) by the Wider RWE Group or the Wider Innogy Group
of all or any part of their respective businesses, assets or
properties or impose any limitation on their ability to conduct all or
any portion of their respective businesses and to own all or any
portion of any of their respective assets or properties;
(iii) impose any limitation on, or result in a delay in, the ability of any
member of the Wider RWE Group to acquire or hold or to exercise
effectively, directly or indirectly, all or any rights of ownership of
shares in or to exercise management control over any member of the
Wider Innogy Group or on the ability of any member of the Wider Innogy
Group to hold or exercise effectively, directly or indirectly, all or
any rights of ownership of shares in or to exercise management control
over any other member of the Wider Innogy Group;
(iv) require any member of the Wider RWE Group or the Wider Innogy Group to
offer to acquire any shares in any member of the Wider Innogy Group
owned by any third party where such acquisition would be material in
the context of the Wider RWE Group taken as a whole or, as the case
may be, the Wider Innogy Group taken as a whole;
(v) impose any limitation on the ability of any member of the Wider Innogy
Group or the Wider RWE Group to integrate or co-ordinate its business,
or any part of it, with the businesses of any other members of the
Wider Innogy Group or Wider RWE Group in each case where the same is
materially adverse to the Wider RWE Group or the Wider Innogy Group as
the case may be;
24
(vi) result in any member of the Wider Innogy Group or the Wider RWE Group
ceasing to be able to carry on business under any name under which it
presently does so in each case where the same is materially adverse to
the Wider RWE Group or the Wider Innogy Group as the case may be; or
(vii) otherwise materially and adversely affect the business, profits or
prospects of any member of the Wider RWE Group or of the Wider Innogy
Group,
and all applicable waiting periods during which any such Third Party could
take, institute, implement or threaten any such action, proceeding, suit,
investigation or enquiry having expired, lapsed or terminated;
(h) all necessary filings having been made and all appropriate waiting periods
under any applicable legislation or regulations of any jurisdiction having
expired, lapsed or been terminated in each case in respect of the Offer and
the acquisition of any shares in, or control of, Innogy by the Wider RWE
Group and all authorisations, orders, grants, recognitions, confirmations,
licences, consents, clearances, permissions and approvals
("authorisations") necessary or appropriate in any jurisdiction for or in
respect of the Offer and the proposed acquisition of any shares in, or
control of, Innogy by the Wider RWE Group being obtained in terms and in a
form reasonably satisfactory to the Offeror from appropriate Third Parties
or from any persons or bodies with whom any member of the Wider RWE Group
or the Wider Innogy Group has entered into contractual arrangements, in
each case where absence of such authorisation would have a material adverse
effect on the Wider RWE Group taken as a whole or the Wider Innogy Group
taken as a whole, and such authorisations together with all authorisations
necessary for any member of the Wider Innogy Group to carry on its business
remaining in full force and effect and no intimation of any intention to
revoke or not to renew any of the same having been made under the laws or
regulations of any jurisdiction and all necessary statutory or regulatory
obligations in any jurisdiction having been complied with;
(i) there being no provision of any arrangement, agreement, licence or other
instrument to which any member of the Wider Innogy Group is a party or by
or to which any such member or any of their assets may be bound or be
subject which, as a result of the making or implementation of the Offer or
the acquisition or proposed acquisition by the Offeror of the share capital
of Innogy or any part thereof or because of a change in the control or
management of Innogy or otherwise, could or might reasonably be expected to
result in (to an extent which is materially adverse in the context of the
Wider Innogy Group taken as a whole):
(i) any moneys borrowed by or any indebtedness (actual or contingent) of
any such member becoming repayable or capable of being declared
repayable immediately or earlier than the stated repayment date or the
ability of such member to borrow monies or incur any indebtedness
being withdrawn or inhibited or any such arrangement, agreement,
licence or instrument relating to any monies borrowed or indebtedness
being terminated or modified or any onerous obligation arising or any
action being taken or arising thereunder;
(ii) the creation or enforcement of any mortgage, charge or other security
whether existing or having arisen over the whole or any part of the
business, property or assets of any such member;
(iii) the interests or business of any such member in or with any other
person, firm or company (or any arrangements relating to such interest
or business) being terminated or adversely modified or affected;
(iv) any such member ceasing to be able to carry on business under any name
under which it presently does so;
(v) any assets or interest of any such member being or falling to be
disposed of or charged or any right arising under which any such asset
or interest could be required to be disposed of or charged otherwise
than in the ordinary course of business;
(vi) the value of any such member or its financial or trading position or
prospects being prejudiced or adversely affected; or
25
(vii) the creation of any liability (actual or contingent) by any such
member of the Wider Innogy Group,
and no event having occurred which, under any provision of any agreement,
arrangement, licence, permit or other instrument to which any member of the
Innogy Group is a party or by or to which any such member or any of its
assets is bound, entitled or subject, is reasonably likely to result in any
of the events or circumstances as are referred to in sub-paragraphs (i) to
(vii) of this condition (i) in any case where such result would be
materially adverse in the context of the Innogy Group taken as a whole;
(j) except as disclosed in the annual report and accounts of Innogy for the
year ended 31 March 2001 or the interim financial statements of Innogy for
the six months ended 30 September 2001 or as publicly announced to the
London Stock Exchange Company Announcements Office by or on behalf of
Innogy or as fairly disclosed to the Offeror on or before 21 March 2002, no
member of the Wider Innogy Group having since 31 March 2001:
(i) save as between Innogy and wholly-owned subsidiaries of Innogy prior
to 21 March 2002 or upon the exercise of rights to subscribe for
Innogy Shares pursuant to the Innogy Share Incentive Plans prior to 21
March 2002, issued or agreed to issue or authorised or proposed the
issue of additional shares of any class, or securities convertible
into, or rights, warrants or options to subscribe for or acquire, any
such shares or convertible securities;
(ii) declared, paid or made or proposed to declare, pay or make any bonus,
dividend or other distribution whether payable in cash or otherwise
other than a distribution by any wholly-owned subsidiary of Innogy or
to Innogy or any of its wholly-owned subsidiaries;
(iii) made, authorised or proposed or announced an intention to propose any
reconstruction, amalgamation, merger, demerger, acquisition, disposal
or transfer of assets or any right, title or interest in any assets
(other than in the ordinary course of business) or shares or
undertaking where any of the foregoing is material in the context of
the Wider Innogy Group taken as a whole;
(iv) other than transactions between Innogy and its wholly owned
subsidiaries or between such wholly-owned subsidiaries made,
authorised or proposed or announced its intention to propose any
change in its share or loan capital;
(v) other than transactions between Innogy and its wholly owned
subsidiaries or between such wholly-owned subsidiaries issued,
authorised or proposed the issue of any debentures or incurred any
indebtedness or contingent liability which is material in the context
of the Wider Innogy Group taken as a whole;
(vi) entered into, varied or terminated, or authorised, proposed or
announced its intention to enter into, vary or terminate any
transaction, arrangement, contract or commitment (whether in respect
of capital expenditure or otherwise) which is of a long term, onerous
or unusual nature or which involves or could involve an obligation of
a nature or magnitude, in each case which is material;
(vii) entered into or varied the material terms of any service agreement
with any director or senior executive of Innogy;
(viii) disposed of or transferred, mortgaged or encumbered any assets or
any right, title or interest in any asset which is material or entered
into any contract, transaction, reconstruction, amalgamation or
arrangement otherwise than in the ordinary course of business which is
material;
(ix) proposed any voluntary winding up or had any order made for its
winding-up (voluntary or otherwise), dissolution or reorganisation or
for the appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of all or any of its assets and
revenues;
(x) waived or compromised any claim which is material;
26
(xi) made or agreed or consented to any material change to the terms of the
trust deeds constituting the pension schemes established for its
directors and/or employees and/or their dependants or to the benefits
which accrue, or to the pensions which are payable thereunder, or to
the basis on which qualification for or accrual or entitlement to such
benefits or pensions are calculated or determined, or to the basis
upon which the liabilities (including pensions) of such pension
schemes are funded or made, or agreed or consented to, any change to
the trustees;
(xii) entered into an agreement which will result in the material
restriction of the scope of the business of the Wider Innogy Group; or
(xiii) entered into any arrangement, contract, commitment or agreement or
passed any resolution in general meeting with respect to any of the
transactions, matters or events referred to in this paragraph,
and for the purpose of this condition (j) "material" shall mean material in
the context of the Wider Innogy Group taken as a whole;
(k) since 31 March 2001 (except as disclosed in the annual report and accounts
of Innogy for the year ended 31 March 2001 or the interim financial
statements of Innogy for the six months ended 30 September 2001 or as
publicly announced to the London Stock Exchange Company Announcements
Office by or on behalf of Innogy or otherwise fairly disclosed to the
Offeror on or before 21 March 2002):
(i) no adverse change in the business, financial or trading position or
profits or prospects of the Wider Innogy Group having occurred;
(ii) no litigation, arbitration proceedings, prosecution or other legal
proceedings having been threatened, announced, instituted or remaining
outstanding by, against or in respect of any member of the Wider
Innogy Group or to which any member of the Wider Innogy Group is a
party (whether as plaintiff or defendant or otherwise) and no
investigation by any Third Party or other investigative body against
or in respect of any member of the Wider Innogy Group having been
threatened, announced, instituted or remaining outstanding by, against
or in respect of any member of the Wider Innogy Group; and
(iii) no liability (contingent or otherwise) having arisen which might be
reasonably likely to materially adversely affect the Wider Innogy
Group,
in each case which is material in the context of the Wider Innogy Group
taken as a whole; and
(l) the Offeror not having discovered that:
(i) any financial, business or other information publicly disclosed at any
time by any member of the Wider Innogy Group is misleading, contains a
misrepresentation of fact or omits to state a fact necessary to make
the information contained therein not misleading which in any case is
material and adverse to the financial or trading position of the Wider
Innogy Group taken as a whole;
(ii) any member of the Wider Innogy Group is subject to any liability,
contingent or otherwise, which is not disclosed in the annual report
and accounts of Innogy for the year ended 31 March 2001, or the
interim financial statements of Innogy for the six months ended 30
September 2001 and which is material in the context of the Wider
Innogy Group taken as a whole;
(iii) any past or present member of the Wider Innogy Group has not complied
in all material respects with all applicable legislation, common law,
regulations, circulars, guidance notes or the like of any jurisdiction
with regard to the use, storage, presence, disposal, transport,
discharge, spillage, leak or emission of any waste or substance
capable of causing harm to the environment or human health or
otherwise relating to environmental matters, where any such
non-compliance would be likely to give rise to any material liability
(whether actual or contingent) or cost on the part of any member of
the Wider Innogy Group; or
27
(iv) there is or is likely to be any liability (whether actual or
contingent) to or requirement by any Third Party to make good, repair,
re-instate or clean up any property now or previously owned, occupied
or made use of by any past or present member of the Wider Innogy Group
under any environmental legislation, common law, regulations, notice,
circular, order, guidance notes or the like which, in any case, is
material in the context of the Wider Innogy Group taken as a whole.
The Offeror reserves the right to waive all or any of conditions (b) to (l)
inclusive, in whole or in part. The Offer will lapse unless all the above
conditions are fulfilled or (if capable of waiver) waived or, where appropriate,
determined by the Offeror to have been or remain satisfied by 3.00 p.m. (London
time), 10.00 a.m. (New York City time) on 26 April 2002 (or such later date as
the Offeror may determine, in accordance with the City Code and the Exchange
Act). The Offeror shall be under no obligation to waive or treat as fulfilled
any of conditions (b) to (l) inclusive by a date earlier than the latest date
for the fulfilment thereof notwithstanding that the other conditions of the
Offer may at such earlier date have been waived or fulfilled and that there are
at such earlier date no circumstances indicating that any of such conditions may
not be capable of fulfilment.
If the Offeror is required by the Panel to make an offer or offers for any
Innogy Shares under Rule 9 of the City Code, the Offeror may make such
alterations to the above conditions as are necessary to comply with that Rule.
If before 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 26 April
2002 or the date when the Offer becomes unconditional as to acceptances
(whichever is the later) the European Commission either initiates proceedings
under Article 6(1)(c) of Council Regulation (EEC) 4064/89 or makes a referral to
a competent authority of the United Kingdom under Article 9(1) thereof and there
is a subsequent reference to the Competition Commission, the Offer will lapse.
As used in this Part A:
"Wider RWE Group" means RWE and its subsidiary undertakings, associated
undertakings and any other undertakings in which RWE and such undertakings
(aggregating their interests) have a substantial interest;
"Wider Innogy Group" means Innogy and its subsidiary undertakings,
associated undertakings and any other undertakings in which Innogy and such
undertakings (aggregating their interests) have a substantial interest; and
for these purposes "subsidiary undertaking", "associated undertaking" and
"undertaking" have the meanings given by the Companies Act 1985 (but for
these purposes ignoring paragraph 20(1)(b) of Schedule 4A to the Companies
Act 1985) and "substantial interest" means a direct or indirect interest in
20 per cent. or more of the equity capital of an undertaking.
28
Part B: Further Terms of the Offer
The following Further Terms apply, unless the context requires otherwise, to the
Offer and the Loan Note Alternative. Except where the context requires
otherwise, any reference in Parts A and B of this Appendix I and in the
Acceptance Forms:
(a) to the "Offer" will include the Loan Note Alternative and any other
election available under the Offer and any revision, variation, renewal or
extension thereof;
(b) to the "Offer becoming unconditional" will include the Offer being or
becoming or being declared unconditional;
(c) to the Offer being or becoming or being declared "unconditional" will be
construed as the Offer being or becoming or being declared unconditional in
all respects; and
(d) to the "Offer Document" will mean this document and any other document
containing details of the Offer.
1 Acceptance Period
(a) The Offer will initially be open for acceptance until 3.00 p.m. (London
time), 10.00 a.m. (New York City time) on 26 April 2002. Although no
revision is envisaged, if the Offer is revised it will remain open for
acceptance for a period of at least 14 days (or such other period as may be
permitted by the Panel that is in accordance with the Exchange Act)
following the date of despatching written notice of the revision to holders
of Innogy Securities. Except with the consent of the Panel, no revision of
the Offer may be made after 13 May 2002, or, if later, the date 14 days
before the last date on which the Offer can become unconditional.
(b) The Offer, whether revised or not, will not (except with the consent of the
Panel) be capable of becoming unconditional after 1.00 p.m. (London time),
8.00 a.m. (New York City time) on 27 May 2002 (or any other time and/or
date beyond which the Offeror has stated that the Offer will not be
extended and has not withdrawn that statement), nor of being kept open
after that time and/or date unless the Offer has previously become
unconditional, provided that the Offeror reserves the right, with the
permission of the Panel, to extend the Offer to a later time(s) and/or
date(s). Except with the consent of the Panel, the Offeror may not, for the
purposes of determining whether the Acceptance Condition has been
satisfied, take into account acceptances received or purchases of Innogy
Shares (including Innogy Shares represented by Innogy ADSs) made after 1.00
p.m. (London time), 8.00 a.m. (New York City time) on 27 May 2002 (or any
other time(s) and/or date(s) beyond which the Offeror has stated that the
Offer will not be extended and has not withdrawn that statement) or such
later time(s) and/or date(s) as the Offeror, with the permission of the
Panel, may determine.
(c) If the Offer becomes unconditional in all respects, it will remain open for
acceptance for the Subsequent Offer Period which shall be for not less than
14 days from the expiry of the Initial Offer Period. If the Offer has
become unconditional in all respects and it is stated that the Offer will
remain open until further notice, then not less than 14 days' notice in
writing will be given to those holders of Innogy Securities who have not
accepted the Offer prior to the closing of the Subsequent Offer Period.
(d) If a competitive situation arises after a no extension statement and/or no
increase statement has been made in connection with the Offer, the Offeror
may, if it specifically reserves the right to do so at the time such
statement is made (or otherwise with the consent of the Panel), withdraw
such statement provided it complies with the requirements of the City Code
and the Exchange Act and in particular that it announces the withdrawal as
soon as possible and in any event within four business days of the
announcement of the competing offer and notifies holders of Innogy
Securities to that effect in writing at the earliest opportunity or, in the
case of holders of Innogy Securities with registered addresses outside the
United Kingdom or whom the Offeror knows to be nominees, custodians or
trustees holding Innogy Shares (including Innogy Shares represented by
Innogy ADSs) for such persons, by announcement in the United Kingdom and
the United States. The Offeror may choose not to be bound by a no increase
or no extension statement if, having reserved the right to do so, it posts
an increased
29
or improved offer which is recommended by the board of directors of Innogy,
or in other circumstances permitted by the Panel.
(e) For the purposes of determining whether the Acceptance Condition has been
satisfied, the Offeror will not be bound (unless otherwise required by the
Panel) to take into account any Innogy Shares (including Innogy Shares
represented by Innogy ADSs) which have been issued or unconditionally
allotted or which arise as the result of the exercise of conversion rights
before that determination takes place unless written notice containing
relevant details of the allotment, issue or conversion has been received
from Innogy or its agents before that time by the Offeror or the Receiving
Agent at Antholin House, 71 Queen Street, London EC4N 1SL (in the case of
Innogy Shares) or the Depositary at the relevant address set forth on the
Letter of Transmittal (in the case of Innogy ADSs) on behalf of the
Offeror. Notification by telex or facsimile or other electronic
transmissions or copies will not be sufficient.
(f) In accordance with applicable SEC policy, at least five US business days
prior to any reduction in the percentage of Innogy Shares (including Innogy
Shares represented by Innogy ADSs) required to satisfy the Acceptance
Condition, the Offeror will announce that it is to exercise the right so to
reduce such percentage. The announcement will be made through a press
release designed to inform holders of Innogy Securities in the United
Kingdom and elsewhere and by placing an advertisement in a newspaper of
national circulation in the United States. Such announcement will state the
level to which the percentage required to satisfy the Acceptance Condition
may be reduced, that such a reduction is possible but that the Offeror need
not declare its actual intentions until it is required to do so under the
City Code and will contain language advising holders of Innogy Securities
to withdraw their Innogy Shares (including Innogy Shares represented by
Innogy ADSs) if their willingness to accept the Offer would be affected by
a reduction of the Acceptance Condition. The Offeror will not make such an
announcement unless it believes that there is a significant possibility
that sufficient Innogy Shares (including Innogy Shares represented by
Innogy ADSs) will be tendered to permit the Acceptance Condition to be
satisfied at such reduced level. Holders of Innogy Securities who are not
willing to accept the Offer if the Acceptance Condition is reduced to a
level lower than 90 per cent. should either not accept the Offer until the
Offer has become unconditional in all respects (which may be at a level of
acceptances lower than 90 per cent.) or be prepared to withdraw their
acceptances promptly following an announcement by the Offeror of its
reservation of the right to reduce the Acceptance Condition. Upon any
announcement being made that the percentage of Innogy Shares (including
Innogy Shares represented by Innogy ADSs) required to satisfy the
Acceptance Condition may be reduced, the Offer shall not be capable of
becoming or being declared unconditional in all respects until the expiry
of at least five US business days thereafter. Holders of Innogy Securities
will be able to accept the Offer for at least five US business days after
the reduction of the Acceptance Condition.
2 Announcements
(a) By 8.00 a.m. (London time) in the United Kingdom and by 8.00 a.m. (New York
City time) in the United States on the business day (the "relevant day")
following the day on which the Offer is due to expire or becomes
unconditional or is revised or extended, or such later time or date as the
Panel may agree, the Offeror will make an appropriate announcement and
inform the London Stock Exchange and the Dow Jones News Service of the
position. Such announcement will also state (unless otherwise permitted by
the Panel) the total number of Innogy Shares (including Innogy Shares
represented by Innogy ADSs) and rights over Innogy Shares (including Innogy
Shares represented by Innogy ADSs) (as nearly as practicable):
(i) for which acceptances of the Offer have been received (showing the
extent, if any, to which such acceptances have been received from
persons acting or deemed to be in concert with the Offeror);
(ii) acquired or agreed to be acquired by or on behalf of the Offeror or
any person acting or deemed to be in concert with the Offeror during
the Offer Period; and
(iii) held by or on behalf of the Offeror or any person deemed to be acting
in concert with the Offeror prior to the Offer Period,
30
and will specify the percentage of the Innogy Shares (including Innogy
Shares represented by Innogy ADSs) represented by each of these
figures. Any decision to extend the time and/or date by which the
Acceptance Condition has to be satisfied may be made at any time up
to, and will be announced not later than, 8.00 a.m. (London time) in
the United Kingdom, 8.00 a.m. (New York City time) in the United
States on the relevant day or such later time and/or date as the Panel
may agree and the announcement will also state the next expiry date
(unless the Offer is unconditional). In computing the number of Innogy
Shares and Innogy ADSs represented by acceptances and purchases, there
may be included or excluded for announcement purposes, subject to
paragraph 7(e) below, acceptances and purchases not in all respects in
order or subject to verification.
(b) In this Appendix I, references to the making of an announcement or the
giving of notice by the Offeror include the release of an announcement by
public relations consultants or by Merrill Lynch to the press and the
delivery by hand or telephone, telex or facsimile transmission or other
electronic transmission of an announcement to the London Stock Exchange and
the Dow Jones News Service. An announcement made otherwise than to the
London Stock Exchange will be notified simultaneously to the London Stock
Exchange and the Dow Jones News Service.
3 Rights of Withdrawal
(a) Innogy Securities in respect of which acceptances have been received may be
withdrawn pursuant to the procedures set out below at any time from the
date of this document until the latest time specified for receipt of
acceptances on the last day of the Initial Offer Period and in certain
other circumstances described below. Innogy Securities in respect of which
acceptances have been received during the Initial Offer Period and not
validly withdrawn during the Initial Offer Period, and Innogy Securities in
respect of which acceptances have been received during the Subsequent Offer
Period, may not be withdrawn, except in certain limited circumstances
described below.
(b) The Offeror will only make an announcement that the Acceptance Condition
has been satisfied, if all other Conditions are also satisfied, fulfilled
or to the extent permitted, waived. If the Offeror, having announced the
Offer to be unconditional, fails by 3.30 p.m. (London time), 10.30 a.m.
(New York City time) on the relevant day (or such later time or date as the
Panel may agree) to comply with any of the other relevant requirements
specified in paragraph 2(a) above, an accepting holder of Innogy Securities
may immediately after that time withdraw his acceptance of the Offer in
accordance with the procedures set out below. Subject to paragraph 1(b)
above, this right of withdrawal may be terminated not less than eight days
after the relevant day by the Offeror confirming, if that be the case, that
the Offer is still unconditional and complying with the other relevant
requirements specified in paragraph 2(a) above. If any such confirmation is
given, the first period of 14 days referred to in paragraph 1(c) above will
run from the date of that confirmation and compliance.
(c) If a no extension and/or no increase statement is withdrawn in accordance
with paragraph 1(d) above, any acceptance made after the date of that
statement may be withdrawn thereafter in the manner referred to in
paragraph 3(b) above for a period of eight days following the date on which
the notice of the withdrawal is posted to holders of Innogy Securities.
(d) Except as provided by this paragraph 3, acceptances and elections made in
accordance with this Appendix I will be irrevocable.
(e) To be effective, a written notice of withdrawal must be received on a
timely basis by the party (either the Receiving Agent or the Depositary) to
whom the acceptance was originally sent at their respective address and
must specify the name of the person who has tendered the Innogy Shares or
Innogy ADSs, the number of Innogy Shares or Innogy ADSs to be withdrawn and
(if Innogy ADSs have been tendered) the name of the registered holder, if
different from the name of the person whose acceptance is to be withdrawn.
In respect of Innogy ADSs, if Innogy ADRs have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
Innogy ADRs, the serial numbers shown on such Innogy ADRs must be submitted
and, unless the Innogy ADSs evidenced by such Innogy ADRs have been
delivered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Innogy ADSs
evidenced by Innogy ADRs have been
31
delivered pursuant to the procedures for book-entry transfer set out in
paragraph 10(c) of this Part B, any notice of withdrawal must specify the
name and number of the account at the appropriate Book-Entry Transfer
Facility to be credited with the withdrawn Innogy ADSs and must otherwise
comply with such Book-Entry Transfer Facility's procedures.
(f) In this paragraph 3, "written notice" (including any letter of appointment,
direction or authority) means notice in writing bearing the original
signature(s) of the relevant accepting holders of Innogy Securities or
his/their agent(s) duly appointed in writing (evidence of whose appointment
satisfactory to the Offeror is produced with the notice). Telex or
facsimile or other electronic transmissions or copies will not be
sufficient. No notice which is post-marked or otherwise appears to the
Offeror or its agents to have been sent from Australia, Canada or Japan
will be treated as valid.
(g) All questions as to the validity (including time of receipt) of any notice
of withdrawal will be determined by the Offeror whose determination (except
as required by the Panel) will be final and binding. None of the Offeror,
Innogy, Merrill Lynch, the Depositary, the Receiving Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for
failure to give such notification or for any determination under this
paragraph (g).
4 The Loan Note Alternative
(a) The Loan Note Alternative is conditional upon all of the Conditions
becoming or being declared satisfied, fulfilled or, to the extent
permitted, waived and will remain open for as long as the Offer remains
open for acceptances. No Loan Notes will be issued unless valid elections
for the Loan Note Alternative are received on or before the date on which
the Offer becomes or is declared unconditional in all respects for at least
(pound)5 million nominal value of Loan Notes. If insufficient elections are
received, Innogy Shareholders who validly accept the Offer and elect for
the Loan Note Alternative will instead receive cash in accordance with the
terms of the Offer. Subject as aforesaid, the Loan Note Alternative will
remain open as long as the Offer is open for acceptance.
(b) No election for the Loan Note Alternative will be valid unless both a valid
acceptance of the Offer and a valid election for the Loan Note Alternative,
duly complete in all respects and accompanied by, if appropriate, all
relevant share certificates and/or other document(s) of title, are duly
received by the time and date on which the Loan Note Alternative closes.
(c) If any acceptance of the Offer which includes an election for the Loan Note
Alternative is not, or is not deemed to be, valid or complete in all
respects at such time, such election shall for all purposes be void and the
holder(s) of Innogy Shares purporting to make such election shall not, for
any purpose, be entitled to receive the Loan Note Alternative, but any such
acceptance which is otherwise valid shall be deemed to be an acceptance of
the Offer (without the Loan Note Alternative) for the number of Innogy
Shares which are the subject of the acceptance and the holder(s) of Innogy
Shares will, on the Offer becoming unconditional, receive the cash
consideration due under the Offer.
(d) The insertion of a number in Box 3 on the Form of Acceptance shall, subject
to the other terms of the Offer, be treated in respect of that number of
Innogy Shares, as an election for the Loan Note Alternative.
(e) An election for the Loan Note Alternative will not be valid unless the Form
of Acceptance is completed correctly in all respects and is received in
accordance with paragraph 8 below.
(f) The Loan Notes will be issued in multiples of(pound)1 and fractional
entitlements will be disregarded.
(g) The Loan Note Alternative is not available to any Innogy Shareholder who is
a US person or to holders of Innogy ADSs.
5 Revised Offer
(a) Although no such revision is envisaged, if the Offer (in its original or
any previously revised form(s)) is revised (either in its terms or
conditions or in the value or form of the consideration offered or
32
otherwise), and any such revised Offer represents on the date on which the
revision is announced (on such basis as Merrill Lynch may consider
appropriate) an improvement (or no diminution) in the value of the
consideration previously offered, the benefit of the revised Offer will,
subject to paragraphs 5(c), 5(d) and 6 below, be made available to holders
of Innogy Securities who have accepted the Offer in its original or
previously revised form(s) ("Previous Acceptors"). The acceptance by or on
behalf of a Previous Acceptor of the Offer in its original or any
previously revised form(s) will, subject to paragraphs 5(c), 5(d) and 6
below, be deemed to be an acceptance of the Offer as so revised and will
also constitute an authority to the Offeror or any duly authorised
representative of Merrill Lynch as his attorney and/or agent to accept any
such revised Offer on behalf of such Previous Acceptor and, if such revised
Offer includes alternative forms of consideration, to make on his behalf
elections for and/or accept such alternative forms of consideration on his
behalf as such attorney and/or agent in his absolute discretion thinks fit
and to execute on behalf of and in the name of such Previous Acceptor all
such further documents and take such further actions (if any) as may be
required to give effect to such acceptances and/or elections. In making any
such acceptance or making any such election, the attorney and/or agent will
take into account the nature of any previous acceptances and/or elections
made by the Previous Acceptor and such other facts or matters as he may
reasonably consider relevant.
(b) The Offeror and Merrill Lynch reserve the right (subject to paragraph 5(a)
above) to treat any executed Form of Acceptance or Letter of Transmittal
relating to the Offer in their original or any previously revised form(s)
which are received (or dated) on or after the announcement or issue of the
Offer in any revised form as a valid acceptance and/or election of the
revised Offer and such acceptance will constitute an authority in the terms
of paragraph 5(a) above mutatis mutandis on behalf of the relevant holder
of Innogy Securities.
(c) The deemed acceptances referred to in this paragraph 5 shall not apply and
the authorities conferred by this paragraph shall not be exercised by the
Offeror or any director of Merrill Lynch if, as a result thereof, the
Previous Acceptor would (on such basis as Merrill Lynch may consider
appropriate) thereby receive less in aggregate consideration than he would
have received in aggregate consideration as a result of acceptance of the
Offer in the form in which they were originally accepted by him or on his
behalf.
(d) The deemed acceptances referred to in this paragraph 5 will not apply and
the authorities conferred by this paragraph 5 will be ineffective to the
extent that a Previous Acceptor shall lodge with the Receiving Agent or the
Depositary, as appropriate within 14 days of the posting of the document
pursuant to which the revision of the Offer is made available to holder of
Innogy Securities, a Form of Acceptance (in the case of Innogy Shares),
Letter of Transmittal (in the case of Innogy ADSs) or some other form
issued by or on behalf of the Offeror in which the holder of Innogy
Securities validly elects to receive the consideration receivable by him
under such revised Offer in some other manner.
(e) If the Offeror makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Offeror will disseminate
additional tender offer materials and extend the Offer to the extent
required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The
minimum period during which an offer must remain open following material
changes in the terms of the offer, other than a change in price or a change
in the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the materiality of the changes, but
generally will be no less than five US business days. With respect to a
change in price or, subject to certain limitations, a change in the
percentage of securities sought, a minimum of ten US business days is
generally required to allow for adequate dissemination to holders of Innogy
Securities. Any reduction in the percentage of Innogy Shares required to
satisfy the Acceptance Condition will be accomplished and announced in the
manner described in paragraph 1(f) of this Part B and not in accordance
with this paragraph.
6 Overseas Holders of Innogy Securities
(a) The making of the Offer (including the Loan Note Alternative) in, or to
certain persons who are resident in, or citizens or nationals of,
jurisdictions outside the UK may be affected by the laws of the relevant
jurisdictions. Holders of Innogy Securities who are residents, citizens or
nationals of jurisdictions outside the UK should inform themselves about
and observe any applicable legal requirements. It is the
33
responsibility of any such person wishing to accept the Offer or the Loan
Note Alternative to satisfy himself as to the full observance of the laws
of the relevant jurisdiction in connection therewith, including the
obtaining of any governmental, exchange control or other consents which may
be required, the compliance with other necessary formalities, and the
payment of any issue, transfer or other taxes due in that jurisdiction by
whomsoever payable and RWE, the Offeror and Merrill Lynch will be fully
indemnified and held harmless by any holder of Innogy Securities for whom
RWE, the Offeror or Merrill Lynch are required to pay any issue, transfer
or other taxes.
(b) The Offer is not being made, directly or indirectly, in or into Australia,
Canada or Japan, or by use of the mails of, or by any means or
instrumentality of interstate or foreign commerce of, or any facilities of
a national securities exchange of, any of these jurisdictions. Such means
or instrumentalities include, but are not limited to, facsimile
transmission, telex and telephone.
(c) Copies of this document, the Acceptance Forms and any related Offer
Documents are not being mailed or otherwise distributed or sent in or into
Australia, Canada or Japan including to holders of Innogy Securities with
registered addresses in these jurisdictions or to persons whom the Offeror
knows to be nominees, custodians or trustees holding Innogy Shares for such
persons. Persons receiving such documents (including, without limitation,
custodians, nominees and trustees) must not distribute, send or mail them
in, into or from Australia, Canada or Japan or use any such instrumentality
in connection with the Offer, and doing so may render invalid any related
purported acceptance of the Offer. Persons wishing to accept the Offer must
not use Australian, Canadian or Japanese mails or any such instrumentality
for any purpose directly or indirectly related to acceptance of the Offer.
Envelopes containing the Acceptance Forms must not be postmarked in
Australia, Canada or Japan or otherwise despatched from these jurisdictions
and all acceptors must provide addresses outside Australia, Canada and
Japan for the receipt of the consideration to which they are entitled under
the Offer and which is despatched by post pursuant to paragraph 9(e)(ii) of
Part B or for the return of the Acceptance Forms and (in relation to Innogy
Shares held in certificated form) any share certificates, and/or other
document(s) of title.
(d) Subject as provided below, a holder of Innogy Securities will be deemed not
to have accepted the Offer if:
(i) he puts "No" in Box 6 of the Acceptance Form and thereby does not make
the representations and warranties set out in paragraph 9(b) of Part B
of Appendix I;
(ii) Box 1 of the Acceptance Form contains an address in Australia, Canada
or Japan or has a registered address in Australia, Canada or Japan and
in either case he does not insert in Box 7 of the Acceptance Form the
name and address of a person or agent outside Australia, Canada and
Japan to whom he wishes the consideration to which he is entitled
under the Offer to be sent, subject to the provisions of this
paragraph 9(b) and applicable laws; or
(iii) an Acceptance Form received from him is received in an envelope
postmarked in, or otherwise appears to the Offeror or its agents to
have been sent from, Australia, Canada or Japan.
The Offeror reserves the right, in its sole discretion, to investigate, in
relation to any acceptance, whether the representations and warranties set
out in paragraph 9(b) of Part B could have been truthfully given by the
relevant holder of Innogy Securities and, if such investigation is made and
as a result the Offeror determines that such representations and warranties
could not have been so given, such acceptance shall not be valid.
(e) If, notwithstanding the restrictions described above, any person
(including, without limitation, custodians, nominees and trustees) whether
pursuant to a contractual or legal obligation or otherwise forwards this
document, the Acceptance Form or any related offering document in, into or
from Australia, Canada or Japan or uses the mails or any means or
instrumentality (including, without limitation, facsimile transmission,
telex and telephones) of interstate or foreign commerce of, or any
facilities of a national securities exchange of Australia, Canada or Japan
in connection with such forwarding, such person should (i) inform the
recipient of such fact, (ii) explain to the recipient that
34
such action may invalidate any purported acceptance by the recipient and
(iii) draw the attention of the recipient to this paragraph 6.
(f) As used in this document and in the Form of Acceptance (i) "Canada" means
Canada, its possessions and territories and all areas subject to its
jurisdiction or any political subdivision thereof; and "Canadian person"
means any person who is a resident, citizen or national of Canada
(including the estate of any such person) or corporations, partnerships,
trusts or other entities created or organised in Canada; (ii) "Australia"
means Australia, its possessions and territories and all areas subject to
its jurisdiction or any political subdivision thereof; and "Australian
person" means any person who is a resident, citizen or national of
Australia (including the estate of any such person) or corporations,
partnerships, trusts or other entities created or organised in Australia;
(iii) "Japan" means Japan, its possessions and territories and all areas
subject to its jurisdiction or any political subdivision thereof; and
"Japanese person" means any person who is a resident, citizen or national
of Japan (including the estate of any such person) or corporations,
partnerships, trusts or other entities created or organised in Japan; and
(iv) "Restricted Overseas Person" means a Canadian, Australian or Japanese
person.
(g) Notwithstanding anything to the contrary contained in this document or the
Acceptance Form, the Offeror and Merrill Lynch may make the Offer (with or
without giving effect to the foregoing paragraphs of this paragraph 6) in
Australia, Canada or Japan or to or for the benefit of a Restricted
Overseas Person pursuant to an exemption under the US Securities Act or in
accordance with applicable law in Australia, Canada or Japan and in this
connection the provisions of paragraph 9(b) of Part B of this Appendix I
will be varied accordingly.
(h) The provisions of this paragraph 6 supersede any terms of the Offer
inconsistent with them. The provisions of this paragraph 6 and/or any other
terms of the Offer relating to overseas holders of Innogy Securities may be
waived, varied or modified as regards specific holder(s) of Innogy
Securities or on a general basis by the Offeror in its absolute discretion.
(i) The Loan Notes have not been, and will not be, listed on any stock exchange
and have not been and will not be registered under the US Securities Act,
or under any relevant securities laws of any state or other jurisdiction of
the United States and the relevant clearances have not been, and will not
be, obtained from the regulatory authority of any province or territory of
Canada. In addition, no prospectus in relation to the Loan Notes has been,
or will be, lodged with, or registered by, the Australian Securities and
Investments Commission and no steps have been taken, nor will any be taken,
to enable the Loan Notes to be offered in compliance with applicable
securities laws of Japan. Accordingly, unless an exemption under such
relevant laws is available, the Loan Notes may not be offered, sold, resold
or delivered, directly or indirectly, in, into or from the United States,
Australia, Canada or Japan or any other jurisdiction in which an offer of
Loan Notes would constitute a violation of relevant laws or require
registration of the Loan Notes, or to or for the benefit of any US person
or resident of Australia, Canada or Japan or any other such jurisdiction.
If, in respect of a Form of Acceptance from any Innogy Shareholder, the
holder is unable to make the representations and warranties set out in
paragraphs 9(b), 9(p) and 9(q) of Part B of this Appendix I, the Offeror
reserves the right, in its absolute discretion, to ignore any election in
that Form of Acceptance to receive Loan Notes and to treat it instead as an
acceptance of the Offer for cash.
(j) The Offer in the United States is made solely by the Offeror, and neither
Merrill Lynch nor any of its affiliates is making the Offer in the United
States.
7 General
(a) Except with the consent of the Panel, the Offer will lapse unless all the
conditions relating to the Offer have been fulfilled or, where appropriate,
have been and continue to be satisfied or have been waived by 1.00 p.m.
(London time), 8.00 a.m. (New York City time) on 27 May 2002 or such later
date as the Offeror, with the consent of the Panel, may decide.
35
(b) If the Offer lapses, it will cease to be capable of further acceptance and
accepting holders of Innogy Securities and the Offeror will cease to be
bound by Acceptance Forms submitted before the time the Offer lapses.
(c) If all of the Conditions are either satisfied, fulfilled or, to the extent
permitted, waived and sufficient acceptances are received, the Offeror
intends to apply the provisions of sections 428 to 430F of the Companies
Act to acquire compulsorily any outstanding Innogy Shares (including Innogy
Shares represented by Innogy ADSs). In respect of Innogy ADSs validly
tendered pursuant to a Letter of Transmittal, the Offeror shall, insofar as
it may determine, be deemed for the purposes of the Acceptance Condition or
generally to have agreed to acquire such Innogy ADSs and the Innogy Shares
represented by such Innogy ADSs.
Holders of Innogy Securities do not have appraisal rights as a result of
the Offer. However, in the event that compulsory acquisition procedures
referred to above are available to the Offeror, holders of Innogy
Securities whose Innogy Securities have not been purchased pursuant to the
Offer will have certain rights to object under section 430C of the
Companies Act.
(d) Except with the consent of the Panel, settlement of the consideration to
which any holder of Innogy Securities is entitled under the Offer will be
implemented in full in accordance with the terms of the Offer without
regard to any lien, right of set-off, counterclaim or other analogous right
to which the Offeror may otherwise be, or claim to be, entitled as against
such holder of Innogy Securities and will be effected in the manner
described in paragraph 15 of the letter from Merrill Lynch contained in
this Offer Document not later than 14 days after the date on which the
Offer becomes unconditional in all respects or 14 days after receipt of a
valid and complete acceptance (including the relevant transfer to escrow or
(as applicable) receipt of the relevant share certificate(s), Innogy ADRs
and/or other documents of title or indemnities satisfactory to the
Offeror), whichever is later. All cash payments (other than payments made
by means of CREST) will be made by cheque drawn on a branch of a UK
clearing bank. No consideration of any kind will be sent to an address in
Australia, Canada or Japan, and no Loan Notes will be sent to an address in
the United States or to a US person.
(e) Notwithstanding the right reserved by the Offeror to treat a Form of
Acceptance or Letter of Transmittal as valid even though not entirely in
order or not accompanied by the relevant share certificate(s), Innogy ADRs
and/or other documents of title, or not accompanied by the relevant
transfer to escrow, except as otherwise agreed with the Panel:
(i) an acceptance of the Offer will only be counted towards fulfilling the
Acceptance Condition if the requirements of Note 4 and, if applicable,
Note 6 on Rule 10 of the City Code are satisfied in respect of it;
(ii) a purchase of Innogy Shares (including Innogy Shares represented by
Innogy ADSs) by the Offeror or its nominee(s) (or, if relevant, any
person acting in concert with the Offeror, or its nominee(s)), if any,
will only be counted towards fulfilling the Acceptance Condition if
the requirements of Note 5 and, if applicable, Note 6 on Rule 10 of
the City Code are satisfied in respect of it; and
(iii) before the Offer becomes unconditional the Receiving Agent will issue
a certificate to the Offeror and/or Merrill Lynch or their respective
agents stating the number of Innogy Shares and Innogy ADSs,
respectively in respect of which acceptances have been received which
comply with subparagraph (i) above and the number of Innogy Shares and
Innogy ADSs respectively otherwise acquired, whether before or during
the Offer Period, which comply with subparagraph (ii) above. Merrill
Lynch will send a copy of such certificate to the Panel and to CSFB
and Deutsche Bank as soon as possible after it is issued.
(f) The terms, provisions, instructions and authorities contained in the
Acceptance Forms constitute part of the terms of the Offer. Words and
expressions defined in this document have the same meanings when used in
the Acceptance Forms, unless the context otherwise requires.
36
(g) All references to 26 April 2002 in this document and in the Acceptance
Forms will (except in paragraph 1(a) and the definition of "Offer Period"
and where the context otherwise requires) be deemed, if the expiry date of
the Offer be extended, to refer to the expiry date of the Offer as so
extended.
(h) References in paragraph 6 above and Part B to a holder of Innogy Securities
will include references to the person or persons executing a Form of
Acceptance or Letter of Transmittal and in the event of more than one
person executing a Form of Acceptance or Letter of Transmittal, such
paragraphs will apply to them jointly and severally.
(i) Any omission to despatch this document, the Form of Acceptance or Letter of
Transmittal or any notice required to be despatched under the terms of the
Offer to, or any failure to receive the same by, any person to whom the
Offer is made, or should be made, will not invalidate the Offer in any way.
(j) The Offeror and Merrill Lynch reserve the right to treat acceptances as
valid if received by or on behalf of either of them at any place or places
determined by them otherwise than as set out in this document or the
Acceptance Forms.
(k) No acknowledgement of receipt of any Form of Acceptance or Letter of
Transmittal, transfer by means of CREST, share certificate(s), or other
document(s) of title will be given by, or on behalf of, the Offeror. All
communications, notices, certificates, documents of title and remittances
to be delivered by or sent to or from holders of Innogy Securities (or
their designated agent(s)) will be delivered by or sent to or from them (or
their designated agent(s)) at their risk.
(l) The Offer extends to persons to whom the Offer is made or should be made
but to whom this document, the Acceptance Forms or any related documents
may not be despatched and such persons may collect copies of these
documents from the Receiving Agent or the Information Agent (in the case of
Innogy Shares) and the Depositary or the Information Agent (in the case of
Innogy ADSs) at the relevant addresses.
(m) The Offeror and Merrill Lynch reserve the right to notify any matter
including the making of the Offer to all or any holder of Innogy Securities
with a registered address outside the UK and the US or whom the Offeror
knows to be a custodian, trustee or nominee holding Innogy Shares
(including Innogy Shares represented by Innogy ADSs) for persons who are
citizens, residents or nationals of jurisdictions outside the UK and the
US, by announcement in the UK to the London Stock Exchange and in the US to
the Dow Jones News Service or in any other appropriate manner, or by paid
advertisement in a daily newspaper published and circulated in the UK and
the US, in which event such notice will be deemed to have been sufficiently
given, notwithstanding any failure by any such holder(s) of Innogy
Securities to receive or see such notice, and all references in this
document to notice in writing by or on behalf of the Offeror will be
construed accordingly.
(n) The Offer is being made by means of this document and advertisements to be
published in the Financial Times (London edition) and The Wall Street
Journal (National edition).
(o) If the Offer lapses then: (i) in respect of Innogy Shares held in
certificated form and Innogy ADSs, the relevant share certificate(s),
Innogy ADRs and/or other documents of title will be returned by post (or by
such other method as may be approved by the Panel) within 14 calendar days
of the Offer lapsing to the person or agent whose name and address (outside
Australia, Canada or Japan) is set out in Box 1 (or, if applicable, Box 7)
of the Form of Acceptance or to the person or agent whose name and address
(outside Australia, Canada or Japan) is set out in the Letter of
Transmittal (as applicable) or, if none is set out, to the name and address
of the person who is the first named holder at his or her registered
address; (ii) in respect of Innogy Shares held in uncertificated form (that
is, in CREST), the Receiving Agent will, immediately after the lapsing of
the Offer (or within such longer period as the Panel may permit, not
exceeding 14 calendar days after the lapsing of the Offer), give transfer
from escrow instructions to CRESTCo to transfer all relevant Innogy Shares
held in escrow balances and in relation to which it is the escrow agent for
the purposes of the Offer to the original available balances of the holders
of Innogy Shares concerned; and (iii) in respect of Innogy ADSs delivered
by book-entry
37
transfer into the Depositary's account at a Book-Entry Transfer Facility,
Innogy ADSs will be credited to an account maintained at the appropriate
Book-Entry Transfer Facility.
(p) All powers of attorney, appointments of agents and authorities conferred by
this Appendix I or in the Acceptance Forms are given by way of security for
the performance of the obligations of the holder of Innogy Securities
concerned and are irrevocable in accordance with section 4 of the Powers of
Attorney Act 1971 except in the circumstances where the donor of such power
of attorney or authority or appointor is entitled to withdraw his
acceptance in accordance with paragraph 3 above and duly does so or except
as specified in paragraph 5(d) above.
(q) The Offer and the Acceptance Forms and all acceptances and elections in
respect thereof will be governed by and construed in accordance with
English law. Execution by or on behalf of an Innogy Shareholder or a holder
of Innogy ADSs of an Acceptance Form constitutes his irrevocable submission
to the exclusive jurisdiction of the courts of England in relation to all
matters arising in connection with the Offer.
(r) In relation to any acceptance of the Offer in respect of a holding of
Innogy Shares which are held in uncertificated form, the Offeror reserves
the right to make such alterations, additions or modifications as may be
necessary or desirable to give effect to any purported acceptance of the
Offer, whether in order to comply with the facilities or requirements of
CREST or otherwise, provided such alterations, additions or modifications
are consistent with the requirements of the City Code or are otherwise made
with the consent of the Panel.
(s) Neither RWE, the Offeror, nor any other member of the RWE Group nor Merrill
Lynch nor any agent or director of any member of the RWE Group or Merrill
Lynch, nor any person acting on behalf of them shall have any liability to
any person for any loss or alleged loss arising from any decision as to the
treatment of acceptances of the Offer or otherwise in connection therewith.
(t) Subject to the Offer becoming or being declared unconditional in all
respects, the Offeror intends to procure that Innogy applies to the UK
Listing Authority for the official listing and to the London Stock Exchange
for the admission to trading of the Innogy Shares to be cancelled. It is
anticipated that such cancellation will take effect no earlier than 20
business days after the Offer becomes unconditional in all respects. The
Offeror also intends to procure that Innogy applies for de-listing of the
Innogy ADSs from the New York Stock Exchange.
8 Procedures for Tendering Innogy Shares
(a) Holders of Innogy Shares will have received with this document a Form of
Acceptance. This section should be read together with the Form of
Acceptance. The provisions of this section shall be deemed to be
incorporated in, and to form a part of, the Form of Acceptance. The
instructions printed on the Form of Acceptance shall be deemed to form part
of the terms of the Offer.
If a holder of Innogy Shares holds Innogy Shares in both certificated and
uncertificated form, he should complete a separate Form of Acceptance for
each holding. Similarly, such holder should complete a separate Form of
Acceptance for Innogy Shares held in uncertificated form, but under
different member account IDs, and for Innogy Shares held in certificated
form, but under different designations. Please contact the Receiving Agent
if you require any additional Forms of Acceptance.
(b) If a holder of Innogy Securities is electing for the Loan Note Alternative,
he must not be in the US or be a resident of Australia, Canada or Japan,
must not be a US person and must not accept the Offer and elect for Loan
Notes with a view to the offer, sale or delivery directly or indirectly, of
such Loan Notes in or into the US, Australia, Canada or Japan and he must
not hold or acquire any Loan Notes for any other person who he has reason
to believe is purchasing for the purpose of that offer, sale or delivery.
(c) To accept the Offer, any Innogy Shareholder, including any person in the US
who holds Innogy Shares, wishing to accept the Offer in respect of all or
any portion of such holder's Innogy Shares, should complete Box 2 and, sign
Box 4 in accordance with the instructions printed on it, if applicable,
complete Boxes 3, 7 and 8 and, if such holder's Innogy Shares are in CREST,
Box 5. All Innogy
38
Shareholders who are individuals should sign the Form of Acceptance in the
presence of a witness, who should also sign Box 4 in accordance with the
instructions printed on it. Unless witnessed, an acceptance will not be
valid.
(d) An accepting Innogy Shareholder should return the completed, signed and
witnessed (if applicable) Form(s) of Acceptance, whether or not such Innogy
Shares are in CREST, to the Receiving Agent. The completed Form(s) of
Acceptance, together, if such holder's Innogy Shares are held in
certificated form, with his share certificate(s) and/or other document(s)
of title, must be lodged with the Receiving Agent, as soon as possible, but
in any event so as to arrive not later than 3.00 p.m. (London time), 10.00
a.m. (New York City time) on 26 April 2002. If you have any questions as to
how to complete the Form(s) of Acceptance, please contact the Helpline. A
Form of Acceptance contained in an envelope postmarked in Australia, Canada
or Japan or otherwise appearing to the Offeror or its agents to have been
sent from Australia, Canada or Japan may be rejected as invalid.
(e) If Innogy Shares are held in uncertificated form, the holder should insert
in Box 5 of the Form of Acceptance the participant ID and member account ID
under which such Innogy Shares are held by him in CREST and otherwise
complete and return the Form of Acceptance as described above. In addition,
such holders should take (or procure to be taken) the action set out below
to transfer the Innogy Shares in respect of which he wishes to accept the
Offer to an escrow balance, specifying the Receiving Agent (in its capacity
as a CREST participant under the participant ID referred to below) as the
escrow agent, as soon as possible, but in any event so that the transfer to
escrow settles not later than 3.00 p.m. (London time), 10.00 a.m. (New York
City time), on 26 April 2002.
(f) If the Innogy Shareholder is a CREST sponsored member, he should refer to
his CREST sponsor before taking any action. Such holder's sponsor will be
able to confirm details of his participant ID and the member account ID
under which his Innogy Shares are held. In addition, only his CREST sponsor
will be able to send the TTE Instruction to CRESTCo in relation to his
Innogy Shares.
(g) A holder of Innogy Shares should send (or, if he is a CREST sponsored
member, procure that his CREST sponsor sends) a TTE Instruction to CRESTCo,
which must be properly authenticated in accordance with CRESTCo's
specifications and which must contain, in addition to the other information
that is required for a TTE Instruction to settle in CREST, the following
details:
(i) the number of Innogy Shares to be transferred to an escrow balance;
(ii) the participant ID of such Innogy Shareholder. This must be the same
participant ID as the participant ID that is inserted in Box 5 of the
Form of Acceptance;
(iii) the member account ID of such Innogy Shareholder. This must be the
same member account ID as the member account ID that is inserted in
Box 5 of the Form of Acceptance;
(iv) the participant ID of the Receiving Agent in its capacity as a CREST
receiving agent. This is 6RA66;
(v) the member account ID of the escrow agent. This is RA325801;
(vi) the Form of Acceptance reference number. This is the number that
appears next to Box 5 on page 3 of the Form of Acceptance. This
reference number should be inserted in the first eight characters of
the shared note field on the TTE Instruction. Such insertion will
enable the Receiving Agent to match the transfer to escrow to your
Form of Acceptance. The Innogy Shareholder should keep a separate
record of this Form of Acceptance reference number for future
reference;
(vii) the intended settlement date. This should be as soon as possible and
in any event not later than 3.00 p.m. (London time), 10.00 a.m. (New
York City time), on 26 April 2002;
(viii)the Corporate Action Number for the Offer. This is allocated by
CRESTCo and can be found by viewing the relevant Corporate Action
Details in CREST; and
(ix) input with Standard Delivery instruction of 80.
39
(h) After settlement of the TTE Instruction, an Innogy Shareholder will not be
able to access the Innogy Shares concerned in CREST for any transaction or
charging purposes. If all of the conditions are either satisfied, fulfilled
or, to the extent permitted, waived, the escrow agent will transfer the
Innogy Shares concerned to itself in accordance with paragraph 9(d)(i) of
Part B of this Appendix.
(i) Such Innogy Shareholder is recommended to refer to the CREST Manual
published by CRESTCo for further information on the CREST procedures
outlined above. For ease of processing, such holder is requested, wherever
possible, to ensure that a Form of Acceptance relates to only one transfer
to escrow.
(j) If no Form of Acceptance reference number, or an incorrect Form of
Acceptance reference number, is included on the TTE Instruction, the
Offeror may treat any amount of Innogy Shares transferred to an escrow
balance in favour of the escrow agent specified above from the participant
ID and member account ID identified in the TTE Instruction as relating to
any Form(s) of Acceptance which relate(s) to the same member account ID and
participant ID (up to the amount of Innogy Shares inserted or deemed to be
inserted on the Form(s) of Acceptance concerned).
(k) Such Innogy Shareholder should note that CRESTCo does not make available
special procedures, in CREST, for any particular corporate action. Normal
system timings and limitations will therefore apply in connection with a
TTE Instruction and its settlement. Such holder should therefore ensure
that all necessary action is taken by him (or by his CREST sponsor) to
enable a TTE Instruction relating to his Innogy Shares to settle prior to
3.00 p.m. (London time), 10.00 a.m. (New York City time), on 26 April 2002.
In this connection, such holder is referred in particular to those sections
of the CREST Manual concerning practical limitations of the CREST system
and timings.
(l) The Offeror will make an appropriate announcement if any of the details
contained in this paragraph 8 alter for any reason.
(m) Normal CREST procedures (including timings) apply in relation to any Innogy
Shares that are, or are to be, converted from uncertificated to
certificated form, or vice versa, during the course of the Offer (whether
any such conversion arises as a result of a transfer of Innogy Shares or
otherwise). Innogy Shareholders who are proposing so to convert any Innogy
Shares are recommended to ensure that the conversion procedures are
implemented in sufficient time to enable the person holding or acquiring
the Innogy Shares as a result of the conversion to take all necessary steps
in connection with an acceptance of the Offer (in particular, as regards
delivery of share certificate(s) and/or other document(s) of title or
transfers to an escrow balance as described above) prior to 3.00 p.m.
(London time), 10.00 a.m. (New York City time), on 26 April 2002.
(n) If the share certificate(s) and/or other document(s) of title is/are not
readily available or is/are lost, the Form of Acceptance should
nevertheless be completed, signed and sent as stated above to the Receiving
Agent so as to be received as soon as possible, but in any event no later
than 3.00 p.m. (London time), 10.00 a.m. (New York City time), on 26 April
2002, together with any share certificate(s) and/or other document(s) of
title that is/are available, accompanied by a letter stating that the
balance will follow or that the accepting holder has lost one or more of
his share certificate(s) and/or other documents of title. If the share
certificate(s) and/or other document(s) of title are lost, the accepting
holder should request the Registrar to send him a letter of indemnity for
completion in accordance with the instructions given. When completed, the
letter of indemnity must be lodged with the Receiving Agent in accordance
with the instructions given, in support of the Form of Acceptance. The
Offeror may treat as invalid, to the extent that it so determines in its
absolute discretion, any acceptance from the depositary for the Innogy ADR
programme which the Offeror has reason to believe has not been properly
authorised by the relevant ADS holder and/or is inconsistent with any
acceptance received from an ADS holder.
9 Form of Acceptance for Innogy Shareholders
Each holder of Innogy Shares who executes and lodges or has executed and lodged
on his behalf a Form of Acceptance with the Receiving Agent, subject to the
rights of withdrawal set out in this document,
40
irrevocably (and so as to bind himself, his heirs, successors and assigns and
his personal or legal representatives):
(a) (i) accepts the Offer in respect of the number of Innogy Shares inserted
or deemed to be inserted in Box 2 of the Form of Acceptance;
(ii) elects under the Loan Note Alternative in respect of the number of
Innogy Shares inserted or deemed to be inserted in Box 3 of the Form
of the Acceptance; and
(iii) agrees to execute any further documents and give any further
assurances which may be required to enable the Offeror to obtain the
full benefit of paragraph 8 and paragraph 9 of this Part B and/or to
perfect any of the authorities expressed to be given hereunder, in
each case on and subject to the terms and conditions set out or
referred to in this document and the Form of Acceptance;
(b) represents and warrants to the Offeror and Merrill Lynch and the Receiving
Agent that, unless "NO" is put in Box 6 of the Form of Acceptance:
(i) he has not received or sent copies or originals of this document, the
Form of Acceptance or any related offering documents in, into or from
Australia, Canada or Japan;
(ii) he has not used in connection with the Offer or the execution or
delivery of the Form of Acceptance, directly or indirectly, the mails
of, or any means or instrumentality (including, without limitation,
e-mail, facsimile transmission, telex and telephone) of interstate or
foreign commerce of, or any facility of a national securities exchange
of Australia, Canada or Japan;
(iii) he is accepting the Offer from outside Australia, Canada or Japan;
and
(iv) he is not an agent or fiduciary acting on a non-discretionary basis
for a principal, unless such agent or fiduciary is an authorised
employee of such principal or such principal has given all
instructions with respect to the Offer from outside Australia, Canada
or Japan;
(c) appoints any director of, or any person authorised by, the Offeror or
Merrill Lynch as his agent and/or attorney (subject to the Offer becoming
unconditional in all respects and him not having validly withdrawn his
acceptance) with an irrevocable instruction and authorisation to:
(i) complete and execute all or any form(s) of transfer, renunciation or
other document(s) in relation to the Innogy Shares referred to in
paragraph 9(a)(i) of this Part B in favour of the Offeror or as the
Offeror or its agents may direct;
(ii) deliver all or any form(s) of transfer, renunciation and/or other
document with any certificate or other document of title for
registration within six months of the Offer becoming unconditional in
all respects; and
(iii) take any other action as the agent and/or attorney may think
necessary or expedient in connection with his acceptance of the Offer
and to vest in the Offeror (or as it may direct) the Innogy Shares
referred to in paragraph 9(a)(i) of this Part B;
(d) undertakes that the execution of the Form of Acceptance and its delivery to
the Receiving Agent, constitutes an irrevocable appointment of the
Receiving Agent as his agent and/or attorney and an irrevocable instruction
and authority to the agent/attorney:
(i) subject to the Offer becoming unconditional in all respects and him
not having validly withdrawn his acceptance, to transfer to the
Offeror (or to such other person or persons as the Offeror or its
agent may direct) by means of CREST all or any of the Relevant Innogy
Shares (as defined below) (but not exceeding the number of Innogy
Shares in respect of which the Offer is accepted or deemed to be
accepted); and
(ii) if the Offer does not become unconditional in all respects, to give
instructions to CRESTCo immediately after the Offer lapses (or within
such longer period as the Panel may permit, not
41
exceeding 14 days of the Offer lapsing) to transfer all Relevant
Innogy Shares to the original available balance of the accepting
Innogy Shareholder.
In this paragraph, "Relevant Innogy Shares" means uncertificated Innogy
Shares in respect of which a transfer or transfers to escrow has or have
been effected in accordance with the procedures described in the letter
from Merrill Lynch and paragraph 8 of this Part B and where the transfer or
transfers to escrow has or have been made in respect of Innogy Shares held
under the same member account ID and participant ID as the member account
ID and participant ID relating to the relevant Form of Acceptance (but
irrespective of whether or not any Form of Acceptance reference number, or
a Form of Acceptance reference number corresponding to that appearing on
the relevant Form of Acceptance, was included in the relevant transfer to
escrow instruction);
(e) authorises and requests (subject to the Offer becoming unconditional in all
respects and him not having validly withdrawn his acceptance):
(i) Innogy or its agents to procure the registration of the transfer of
the Innogy Shares referred to in paragraph 9(a)(i) of this Part B and,
in respect of Innogy Shares that are held in certificated form, the
delivery of the share certificate(s) and other document(s) of title in
respect of the Innogy Shares to the Offeror or as it may direct;
(ii) if the Innogy Shares referred to in paragraph 9(a)(i) of this Part B
are held in certificated form, to the Offeror or its agents to procure
the despatch by post (or by such other method as may be approved by
the Panel) of the consideration to which he is entitled under the
Offer at his risk to the person or agent whose name and address is set
out in Box 7 of the Form of Acceptance or, if no person or agent's
name and address is set out, to the first named holder at his
registered address;
(iii) if the Innogy Shares referred to in paragraph 9(a)(i) of this Part B
are held in uncertificated form, to the Offeror or its agents to
ensure that an assured payment obligation is created in favour of the
Innogy Shareholder's payment bank in accordance with the CREST assured
payment arrangements in respect of any cash consideration to which
that shareholder is entitled; and
(iv) the Offeror, Innogy or their respective agents to record and act on
any instructions with regard to payments or notices which have been
entered in the records of Innogy in respect of his holding of Innogy
Shares;
(f) agrees that:
(i) the Offeror may decide to despatch all or part of the consideration
payable to an Innogy Shareholder whose Innogy Shares are held in
uncertificated form in accordance with paragraph 9(e)(iii) of this
Part B; and
(ii) the consideration payable to a shareholder whose Innogy Shares are
held in uncertificated form will be despatched in accordance with
paragraph 9(e)(iii) of this Part B if the shareholder is a CREST
member whose registered address is in Australia, Canada or Japan;
(g) gives authority to any director of, or person authorised by, the Offeror or
Merrill Lynch within the terms of paragraph 5 of this Part B;
(h) subject to the Offer becoming unconditional in all respects and him not
having validly withdrawn his acceptance (or if the Offer will become
unconditional in all respects or lapse on the outcome of the resolution in
question or if the Panel gives its consent) and pending registration:
(i) authorises the Offeror or its agent to direct the exercise of any
votes and any other rights and privileges (including the right to
requisition the convening of a general or separate class meeting of
Innogy) attaching to the Innogy Shares referred to in paragraph
9(a)(i) of Part B of this Appendix;
42
(ii) authorises Innogy or its agent to send any notice, circular, warrant
or other document or communication which may be required to be sent to
him as a member of Innogy to the Offeror, care of the Receiving Agent;
(iii) authorises any director of, or person authorised by, the Offeror or
Merrill Lynch to sign any document and do such things as may in the
opinion of that agent and/or attorney seem necessary or desirable in
connection with the exercise of any votes or other rights or
privileges attaching to the Innogy Shares held by him (including,
without limitation, signing any consent to short notice of a general
or separate class meeting as his agent and/or attorney and on his
behalf and executing a form of proxy appointing any person nominated
by the Offeror to attend general and separate class meetings of Innogy
and attending any such meeting and exercising the votes attaching to
the Innogy Shares referred to in paragraph 9(a)(i) of this Part B on
his behalf, where relevant, such votes to be cast so far as possible
to satisfy any outstanding condition of the Offer); and
(iv) agrees not to exercise any such rights without the consent of the
Offeror and irrevocably undertakes not to appoint a proxy for or to
attend such general or separate class meetings of Innogy;
This authority will cease to be valid if the acceptance is validly
withdrawn in accordance with paragraph 3 of this Part B;
(i) agrees that he will deliver to the Receiving Agent, or procure the delivery
to the Receiving Agent of his share certificate(s) and/or other document(s)
of title in respect of those Innogy Shares referred to in paragraph 9(a)(i)
of this Part B that are held in certificated form, or an indemnity
acceptable to the Offeror, as soon as possible and in any event within two
months of the Offer becoming unconditional in all respects;
(j) agrees that he will take (or procure to be taken) the necessary action to
transfer all those Innogy Shares referred to in paragraph 9(a)(i) of this
Part B that are held in uncertificated form to an escrow balance as soon as
possible and in any event so that the transfer to escrow settles within two
months of the Offer becoming unconditional in all respects;
(k) agrees that if for any reason any Innogy Shares in respect of which a
transfer to an escrow balance has been effected are converted to
certificated form, he will immediately deliver or ensure the immediate
delivery of the share certificates or other documents of title in respect
of all those Innogy Shares that are converted to the Receiving Agent;
(l) agrees that the creation of an assured payment obligation in favour of his
payment bank in accordance with the CREST assured payment arrangements as
referred to in paragraph 9(e)(iii) of this Part B will, to the extent of
the obligation so created, discharge fully any obligation of the Offeror or
Merrill Lynch to pay to him the cash consideration to which he is entitled
under the Offer;
(m) agrees that he will do everything necessary or expedient in the opinion of
the Offeror or the Receiving Agent to vest in the Offeror or its nominees
or such other persons as it may decide the Innogy Shares referred to in
paragraph 9(a)(i) of this Part B and to enable the Receiving Agent to
perform its functions as escrow agent for the purposes of the Offer;
(n) agrees to ratify everything which may be done or effected by any director
of, or person authorised by, the Offeror, Merrill Lynch or the Receiving
Agent in exercise of any of the powers and/or authorities under Part B of
this Appendix;
(o) agrees that, if any provision of Part B of this Appendix will be
unenforceable or invalid or will not operate so as to afford the Offeror,
Merrill Lynch or the Receiving Agent or any of their respective directors
or persons authorised by them, the benefit of the authority expressed to be
given in Part B of this Appendix, he will, with all practicable speed, do
everything that may be required or desirable to enable the Offeror, Merrill
Lynch and the Receiving Agent and any of their respective directors or
persons authorised by them to secure the full benefit of Part B of this
Appendix;
43
(p) represents and warrants that he is entitled to sell and transfer the
beneficial ownership of the Innogy Shares referred to in paragraph 9(a)(i)
of this Part B and that such shares are sold fully paid and free from all
liens, equities, charges, encumbrances and other third party rights and
interests of any nature whatsoever and together with all rights attaching
to them on or after 22 March 2002 including, without limitation, voting
rights and the right to receive all dividends and other distributions
declared, paid or made on or after that date;
(q) represents and warrants to the Offeror and Merrill Lynch and the Receiving
Agent that, if he is electing for the Loan Note Alternative, he is not in
the United States or a resident of Australia, Canada or Japan nor is he a
US person and he is not accepting the Offer and electing for Loan Notes
with a view to the offer, sale or delivery, directly or indirectly, of any
such Loan Notes in or into the United States, Australia, Canada or Japan
and will not hold or acquire any Loan Notes for any other person who he has
reason to believe is purchasing for the purpose of that offer, sale or
delivery;
(r) agrees that the terms and conditions of the Offer are deemed to be
incorporated in, and form part of, the Form of Acceptance;
(s) agrees that, on execution, the Form of Acceptance takes effect as a deed;
(t) agrees that the execution of the Form of Acceptance constitutes his
agreement to the terms of paragraph 7(q) of this Part B;
(u) agrees and acknowledges that he is not a client (as defined in the rules of
the Financial Services Authority) of Merrill Lynch or CSFB or Deutsche Bank
in connection with the Offer; and
(v) if he is a US Holder, certifies that he is not subject to back up
withholding tax by completing Internal Revenue Service Form W-9, or a valid
substitute or, if the holder is not a US Holder for US federal income tax
purposes, agrees, if relevant, to establish an exemption from certain US
federal information return reporting and backup withholding requirements by
completing Internal Revenue Service Form W-8BEN which is available from the
US Internal Revenue Service.
A reference in this paragraph 9 to a holder of Innogy Shares includes a
reference to the person or persons executing the Form of Acceptance and in
the event of more than one person executing a Form of Acceptance, the
provisions of this paragraph 9 will apply to them jointly and to each of
them.
10 Procedures for Acceptance by Innogy ADS Holders
(a) Letter of Transmittal/Notice of Guaranteed Delivery If you are a holder of
Innogy ADSs evidenced by Innogy ADRs, you will have also received a Letter
of Transmittal and a Notice of Guaranteed Delivery for use in connection
with the Offer. This section should be read together with the instructions
on the Letter of Transmittal. The instructions printed on the relevant
Letter of Transmittal shall be deemed to form part of the terms of the
Offer.
(b) Valid acceptance For a holder of Innogy ADSs evidenced by Innogy ADRs to
validly accept the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), together with any required signature guarantees
or, in the case of a book-entry transfer, an Agent's Message, and any
other documents required by the Letter of Transmittal, must be
received by the Depositary and either the Innogy ADRs evidencing such
Innogy ADSs must be received by the Depositary or such Innogy ADRs
evidencing such Innogy ADSs must be delivered pursuant to the
procedure for book-entry transfer set forth below (and a Book-Entry
Confirmation received by the Depositary in accordance with such
procedures); or
(ii) such holder must comply with the Guaranteed Delivery Procedures set
out in paragraph 10(h) below.
44
The Offer in respect of Innogy ADSs evidenced by Innogy ADRs shall be
validly accepted by (i) delivery of a Letter of Transmittal, Innogy ADRs
evidencing Innogy ADSs and any other required documents to the Depositary
by a holder of Innogy ADSs (without any further action by the Depositary)
subject to the terms and conditions set out in this document and the Letter
of Transmittal or (ii) completion of the book-entry transfer procedures
described below. The acceptance of the Offer by a holder of Innogy ADSs
evidenced by Innogy ADRs pursuant to the procedures described above,
subject to the withdrawal rights described below, will be deemed to
constitute a binding agreement between such holder of Innogy ADSs and the
Offeror upon the terms and subject to the conditions of the Offer. If a
holder of Innogy ADSs validly accepts the Offer in respect of an Innogy
ADS, the Innogy Shares represented by such Innogy ADS may not be tendered
independently. A Letter of Transmittal and other required documents
contained in an envelope postmarked in Australia, Canada or Japan or
otherwise appearing to the Offeror or its agents to have been sent from
Australia, Canada or Japan may be rejected as invalid. By delivery of a
Letter of Transmittal to the Depositary in respect of Innogy ADSs, the
holder of such Innogy ADSs agrees to: (a) not instruct the depositary for
the Innogy ADR program to accept the Offer in respect of the Innogy Shares
represented by such Innogy ADSs and (b) not deliver such Innogy ADSs to the
depositary for the Innogy ADRprogramme to request withdrawal of the Innogy
Shares represented by such Innogy ADSs. The Offeror may treat as invalid,
to the extent that it so determines in its absolute discretion, any
acceptance from the depositary for the Innogy ADRprogramme which the
Offeror has reason to believe has not been properly authorised by the
relevant ADS holder and/or is inconsistent with any acceptance received
from an ADS holder.
(c) Book-entry transfer
The Depositary will establish an account at each of the Book-Entry Transfer
Facilities with respect to Innogy ADSs evidenced by Innogy ADRs held in
book-entry form for the purposes of the Offer within two US business days
from the date of this document. Any financial institution that is a
participant in any of the Book-Entry Transfer Facility's systems may make
book-entry delivery of Innogy ADSs by causing a Book-Entry Transfer
Facility to transfer such Innogy ADSs into the Depositary's account at such
Book-Entry Transfer Facility in accordance with that Book-Entry Transfer
Facility's procedures for such transfer.
Although delivery of Innogy ADSs evidenced by Innogy ADRs may be effected
through book-entry transfer into the Depositary's account at a Book-Entry
Transfer Facility, either:
(i) the Letter of Transmittal, properly completed and duly executed,
together with any required signature guarantees; or
(ii) an Agent's Message,
and, in either case, any other required documents, must in any case be
transmitted to, and received by, the Depositary at the relevant address set
forth in the Letter of Transmittal before Innogy ADSs evidenced by Innogy
ADRs will be either counted as a valid acceptance, or purchased, or such
holder must comply with the Guaranteed Delivery Procedures described below.
Delivery of documents to a Book-Entry Transfer Facility does not constitute
delivery to the Depository.
(d) Method of delivery
The method of delivery of Innogy ADRs, Letters of Transmittal and all other
required documents is at the option and risk of the accepting holder of
Innogy ADSs. Innogy ADSs will be deemed delivered only when the Innogy ADRs
evidencing such Innogy ADSs are actually received by the Depository (in the
case of a book-entry transfer, by Book-Entry Confirmation). If delivery is
by mail, registered mail with return receipt requested, properly insured,
is recommended. In all cases, sufficient time should be allowed to ensure
timely delivery. No acknowledgement of receipt of documents will be given
by, or on behalf of, the Offeror.
45
(e) Signature guarantees
No signature guarantee is required on the Letter of Transmittal if:
(i) the Letter of Transmittal is signed by the registered holder of the
Innogy ADSs evidenced by Innogy ADRs in respect of which the Offer is
being accepted therewith and such registered holder has not completed
either the Box entitled "Special Delivery Instructions" or the Box
entitled "Special Payment Instructions" in the Letter of Transmittal;
or
(ii) the Offer is being accepted in respect of such Innogy ADSs for the
account of an Eligible Institution.
In all other cases, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal.
(f) Innogy ADSs and ADRs
If the Letter of Transmittal is signed by a person other than the
registered holder(s) of Innogy ADSs evidenced by Innogy ADRs in respect of
which the Offer is being accepted, then such Innogy ADRs must be endorsed
or accompanied by appropriate stock powers signed exactly as the name or
names of the registered owner or owners appear on the Innogy ADRs.
Signatures on such Innogy ADRs or stock powers must be guaranteed by an
Eligible Institution. See Instruction 5 to the Letter of Transmittal.
(g) Partial acceptances (not applicable to book-entry transfers)
If fewer than all of the Innogy ADSs evidenced by any Innogy ADRs delivered
to the Depositary are to be tendered, the holder thereof should so indicate
in the Letter of Transmittal by filling in the number of Innogy ADSs that
are tendered in the Box entitled "Number of ADSs Tendered". In such case, a
new Innogy ADR for the untendered Innogy ADSs will be sent to the
registered holder, unless otherwise provided in the Letter of Transmittal
in the box entitled "Special Delivery Instructions", as promptly as
practicable following the date the tendered Innogy ADSs are accepted for
payment. All Innogy ADSs delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated. See Instruction 4 to the Letter
of Transmittal.
(h) Guaranteed delivery procedures
(i) If a holder of Innogy ADSs evidenced by Innogy ADRs wishes to tender
Innogy ADSs pursuant to the Offer and the Innogy ADRs evidencing such
Innogy ADSs are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis, or if time
will not permit all required documents to reach the Depositary prior
to the expiration of the Offer, such holder's tender of Innogy ADSs
may be effected if all of the following conditions are satisfied (the
"Guaranteed Delivery Procedures"):
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Offeror is
received by the Depositary, as provided below, prior to the
expiration of the Offer; and
(c) the Innogy ADRs evidencing the tendered Innogy ADSs (or, in the
case of Innogy ADSs held in book-entry form, timely confirmation
of the book-entry transfer of such Innogy ADSs into the
Depositary's account at a Book-Entry Transfer Facility as
described above), together with a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) with any
required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and any other documents required by
the Letter of Transmittal, are received by the Depositary within
three New York Stock Exchange business days after the date of
execution of such Notice of Guaranteed Delivery.
46
(ii) The Notice of Guaranteed Delivery may be delivered by hand,
transmitted by facsimile transmission or mailed to the Depositary and
must include a signature guarantee by an Eligible Institution in the
form set out in such Notice of Guaranteed Delivery.
(iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a
valid acceptance for the purpose of satisfying the Acceptance
Condition. To be counted towards satisfaction of this requirement,
prior to the expiration of the Initial Offer Period, the Innogy ADRs
evidencing Innogy ADSs referred to in the Notice of Guaranteed
Delivery must be received by the Depositary (or, in the case of in
Innogy ADSs held in book-entry form, timely confirmation of the
book-entry transfer of such Innogy ADSs into the Depositary's account
at a Book-Entry Transfer Facility as described above), together with a
properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message) and any other
required documents.
(i) Other requirements
By executing the Letter of Transmittal as set out above, the holder of
Innogy ADSs evidenced by Innogy ADRs in respect to which the Offer has been
accepted will agree that, effective from and after the date all conditions
are either satisfied, fulfilled or, to the extent permitted, waived:
(i) the Offeror or its agents shall be entitled to direct the exercise of
any votes attaching to any Innogy Shares represented by Innogy ADSs,
in respect of which the Offer has been accepted or is deemed to have
been accepted (the "Accepted ADSs") and any other rights and
privileges attaching to such Innogy Shares, including any right to
requisition a general meeting of Innogy or any class of its
securities;
(ii) the execution of the Letter of Transmittal (together with any
signature guarantees) and its delivery to the Depositary or the
completion of the book-entry transfer procedures shall constitute:
(a) an authority to Innogy or its agents from the holder of Accepted
ADSs to send any notice, circular, warrant, document or other
communication that may be required to be sent to him as a holder
of Innogy ADSs to the Offeror at its registered office;
(b) an authority to the Offeror or its agent to sign any consent to
short notice of a general meeting or separate class meeting on
behalf of the holder of Accepted ADSs and/or to execute a form of
proxy in respect of such Accepted ADSs appointing any person
nominated by the Offeror to attend general meetings and separate
class meetings of Innogy and any adjournment thereof and to
exercise the votes attaching to the Innogy Shares represented by
such Accepted ADSs on his behalf;
(c) the agreement of the holder of Accepted ADSs not to exercise any
such rights without the consent of the Offeror and the
irrevocable undertaking of such holder of Accepted ADSs not to
appoint a proxy for or to attend any such general meetings or
separate class meetings;
(d) a representation and warranty that such holder of Innogy ADSs (i)
has not received or sent copies or originals of this document or
any Letter of Transmittal or any related documents in, into or
from, Australia, Canada or Japan; (ii) has not used in connection
with the Offer or the execution or delivery of the Letter of
Transmittal, directly or indirectly, the mails of, or any means
or instrumentality (including, without limitation, e-mail,
facsimile transmission, telex and telephone) of interstate or
foreign commerce of, or any facility of a national securities
exchange of Australia, Canada or Japan; (iii) is accepting the
Offer from outside Australia, Canada or Japan; and (iv) is not an
agent or fiduciary acting on a non-discretionary basis for a
principal, unless such agent or fiduciary is an authorised
employee of such principal or such principal has given any
instructions with respect to the Offer from outside Australia,
Canada or Japan;
(e) confirmation that such holder of Innogy ADSs is entitled to sell
and transfer the Accepted ADSs and that such Accepted ADSs are
sold fully paid and free from all liens, charges,
47
equitable interests, third party rights and interests and
encumbrances and together with all rights now or hereafter
attaching thereto, including voting rights and the right to
receive all dividends and other distributions (if any) declared,
made or paid with respect to the Innogy Shares represented by
Innogy ADSs; and
(f) the execution of the Letter of Transmittal (together with any
signature guarantees) and its delivery to the Depositary (or the
completion of the book-entry transfer procedures) shall
constitute an authority in accordance with the terms of paragraph
5 of this Part B.
References in this paragraph 10 to a holder of Innogy ADSs shall
include references to the person or persons executing a Letter of
Transmittal and, in the event of more than one person executing a
Letter of Transmittal, the provisions of this Part B shall apply to
them jointly and to each of them.
(j) Currency of cash consideration
Holders of Innogy ADSs may elect to receive the cash element of the
consideration in pounds sterling. The pounds sterling consideration
available to holders of Innogy ADSs is the same, per Innogy Share, as that
offered to Innogy Shareholders. To facilitate the settlement of the Offer,
unless they elect to receive pounds sterling, holders of Innogy ADSs will
receive consideration converted into US dollars at the exchange rate
obtainable on the spot market in London at approximately noon (London Time)
on the date the cash consideration is made available by the Offeror to the
Depositary for delivery in respect of the relevant Innogy ADSs. A holder of
Innogy ADSs may receive such amount on the basis set out above only in
respect of the whole of his holding of Innogy ADSs in respect of which he
accepts the Offer. Holders of Innogy ADSs may not elect to receive both
pounds sterling and US dollars.
The actual amount of US dollars received will depend upon the exchange rate
prevailing on the day on which funds are made available to the Depositary
by the Offeror. Holders of Innogy ADSs should be aware that the US
dollar/pounds sterling exchange rate which is prevailing at the date on
which an election is deemed to be made to receive US dollars and on the
dates of despatch and receipt of payment may be different from that
prevailing on the day on which funds are made available to the Depositary
by the Offeror. In all cases, fluctuations in the US dollar/pounds sterling
exchange rate are at the risk of accepting holders of Innogy ADSs who are
treated as having elected to receive their consideration in US dollars.
None of RWE, the Offeror and their advisers or agents shall have any
responsibility with respect to the actual amount of cash consideration
payable other than in pounds sterling.
11 Substitute Acceptance Forms
Holders of Innogy Securities have been sent with this document a Form of
Acceptance and/or a Letter of Transmittal (accompanied by a Notice of Guaranteed
Delivery). All holders of Innogy Shares, including persons in the US who hold
Innogy Shares, have been sent a Form of Acceptance, which they must use to
tender their Innogy Shares and accept the Offer. All holders of Innogy ADSs have
been sent a Letter of Transmittal and a Notice of Guaranteed Delivery which they
must use to tender their Innogy ADSs and accept the Offer. Should any holder of
Innogy Securities receive an incorrect form with which to accept the Offer or
require any additional forms, that person should contact the Helpline.
48
APPENDIX II
Particulars of the Loan Notes
The Loan Notes will be created by a resolution of the Directors of the Offeror
and will be constituted by the Loan Note Instrument executed as a deed by the
Offeror. The issue of the Loan Notes is conditional, inter alia, on the Offer
becoming or being declared unconditional in all respects. The Loan Note
Instrument will contain provisions, inter alia, to the following effect:
1 Form and Status
The Loan Notes will be issued by the Offeror in amounts and integral multiples
of (pound)1 in nominal amount and will constitute unsecured obligations of the
Offeror. The Loan Note Instrument will not contain any restrictions on
borrowing, disposals or charging of assets by the Offeror. All fractional
entitlements to the Loan Notes will be disregarded.
No Loan Notes will be issued unless, on or before the date on which the Offer
becomes or is declared unconditional in all respects, valid elections have been
received in respect of at least (pound)5 million in nominal value of Loan Notes.
If insufficient elections are received, Innogy Shareholders electing for the
Loan Note Alternative will instead receive cash in accordance with the terms of
the Offer.
The Loan Note Alternative will remain open for acceptance for so long as the
Offer remains open for acceptance. The Loan Note Alternative will be conditional
upon the Offer becoming or being declared unconditional in all respects.
Merrill Lynch, financial adviser to RWE and the Offeror has advised that based
on market conditions on 26 March 2002 (the last practicable date prior to the
posting of this document), in its opinion, if the Loan Notes had been in issue
on that date, the value of each (pound)1 nominal of Loan Notes would have been
approximately 99 pence.
2 Interest
Until such time as the Loan Notes are repaid in full, interest on the Loan Notes
will be payable by half yearly instalments in arrears (less any tax) on 10
January and 10 July in each year (an "Interest Payment Date"), except that the
first payment of interest will be made on the date (the "First Payment Date")
which is the first 10 January or 10 July to fall on or after the date which is
six months after the first date of issue of any of the Loan Notes. On the First
Payment Date, interest will be paid in respect of the period from (and
including) the first date of issue of any of the Loan Notes to (but excluding)
the First Payment Date. The period from and including that or any subsequent
Interest Payment Date up to but excluding the following Interest Payment Date is
an "Interest Period".
(a) The rate of interest on the Loan Notes for each Interest Period will be the
rate per annum which is 0.5 per cent. below the arithmetic mean (rounded
down, if necessary, to four decimal places) of the respective rates which
are quoted as of 11.00 a.m. on the first business day of the Interest
Period on the "LIBP" page on the Reuters Monitor Money Rate Service (or
such other page or service as may replace it for the purpose of displaying
London inter-bank sterling offered rates of leading reference banks) as
being the interest rates offered in the London inter-bank market for
six-month sterling deposits but:
(i) if only two or three such offered quotations appear, the relevant
arithmetic mean (rounded as mentioned above) shall be determined on
the basis of those offered quotations; and
(ii) if no, or only one, such offered quotation appears, the relevant
arithmetic mean (rounded as mentioned above) shall be the rate (as
quoted to the Offeror at its request) at which Barclays Bank Plc is
offering six-month sterling deposits to prime banks in the London
inter-bank market at or about 11.00 a.m. (London time) on the first
business day of the relevant Interest Period.
49
(b) If a rate of interest cannot be established in accordance with the
provisions of sub-paragraph (a) above for any Interest Period, then the
rate of interest for that period shall be:
(i) in the case of the first Interest Period, the rate per annum
calculated otherwise in accordance with sub-paragraph (a) but by
reference to the first business day of that Interest Period on which
it can be so established; and
(ii) in the case of any Interest Period, the same as that applicable to the
Loan Notes during the previous Interest Period, unless in any such
case such prime bank in the London inter-bank market as the Offeror
shall reasonably select for the purpose shall have been prepared to
offer a rate as described in sub-paragraph (a) above, in which case
the rate of interest in respect of the relevant Interest Period shall
be determined on the basis of the rate so offered.
(c) Payment of interest in respect of the Loan Notes will not be made to
addresses in the United States, Australia, Canada or Japan.
Each instalment of interest shall be calculated on the basis of a 365 day
year and the number of days elapsed in the relevant Interest Period.
Interest shall accrue from day to day.
3 Repayment
(a) A Noteholder may require the Offeror to repay the whole or any part (being
(pound)1 nominal or any integral multiple thereof) of the principal amount
of his holding of Loan Notes at par, together with accrued interest
(subject to any requirement to deduct tax therefrom) up to but excluding
the date of repayment, on the First Payment Date and subsequent Interest
Payment Dates by giving not less than 30 days' prior notice in writing to
the Offeror to expire on or before the relevant redemption date accompanied
by the certificate(s) for all the Loan Notes to be repaid and a notice of
repayment.
(b) If, at any time, the principal amount of all Loan Notes outstanding equals
or is less than twenty per cent. in total nominal amount of the Loan Notes
issued in connection with the Offer, the Offeror shall be entitled, on
giving the remaining Noteholders not less than 30 days' notice in writing
expiring on any Interest Payment Date on or following the later of (a) the
date falling six months following the latest date of issue of any of the
outstanding Loan Notes and (b) 10 July 2003 or any subsequent Interest
Payment Date, to redeem all (but not some only) of the Loan Notes at par
together with accrued interest (subject to any requirement to deduct tax
therefrom) up to but excluding the date of redemption.
(c) Any Loan Notes not previously repaid, redeemed or purchased will be repaid
in full at par on 10 January 2008, together with accrued interest (subject
to any requirement to deduct tax therefrom) up to but excluding that date.
(d) Each Noteholder will be entitled by notice in writing to require all or
part (being (pound)1 nominal amount or any integral multiple thereof) of
the Loan Notes held by him to be repaid at par together with accrued
interest (subject to any requirement to deduct tax therefrom) if:
(i) any principal or interest on any Loan Notes held by that Noteholder is
not paid in full within 30 days after the due date for payment; or
(ii) an order is made or an effective resolution is passed for the
winding-up or dissolution of the Offeror (other than for the purposes
of a reconstruction, amalgamation, merger or members' voluntary
winding-up on terms previously approved by extraordinary resolution);
or
(iii) an encumbrancer takes possession of, or a trustee, receiver,
administrator or similar officer is appointed or an administration
order is made in respect of, the whole or substantially the whole of
the undertaking or property of the Offeror and such person has not
been paid out or discharged within 30 days.
(e) Payment of principal in respect of the Loan Notes will not be made to
addresses in the United States, Australia, Canada or Japan.
50
4 Purchase of Loan Notes
The Offeror may, at any time on or after the date falling six months after the
latest date of issue of any outstanding Loan Notes, purchase any Loan Notes at
any price by tender (available to all Noteholders alike), by private treaty or
otherwise by agreement with the relevant Noteholder(s).
5 Cancellation
Any Loan Notes repaid, redeemed or purchased will be cancelled and will not be
available for re-issue.
6 Additional Notes
Each Noteholder will have the right to acquire (by subscription at a nominal
value of an amount up to or equal to such Noteholder's then holding of Loan
Notes) additional loan notes to be issued by a subsidiary of RWE (other than the
Offeror) (the "Additional Notes") on terms and conditions substantially
identical to those applicable to the Loan Notes, except as follows:
(a) the Additional Notes will not be issued before 10 July 2003;
(b) the rate of interest on the Additional Notes shall be one per cent. below
the rate payable in respect of the Loan Notes; and
(c) the Additional Notes shall not include any right to acquire additional
securities nor shall they be guaranteed.
7 Registration
The Loan Notes will be evidenced by certificates and will be registered and
transferable in amounts or integral multiples of (pound)1, provided that
transfers of Loan Notes will not be registered during the twenty-one days
immediately preceding an Interest Payment Date or while the register of
Noteholders is closed.
No transfer of Loan Notes will be registered until each transferee has delivered
to the Offeror a certificate in the prescribed form to the effect that such
transferee is not a US person, an Australian person, a Canadian person or a
Japanese person and is not acquiring, and will not be holding, such Loan Notes
for the account or benefit of a US person, an Australian person, a Canadian
person or a Japanese person or with a view to the offer, sale or delivery,
directly or indirectly, of such Loan Notes in the United States, Australia,
Canada or Japan or to or for the account or benefit of any US person, an
Australian person, a Canadian person or a Japanese person or any other person
who such transferee has reason to believe is purchasing for the purposes of such
offer, sale or delivery.
Registered addresses of holders of Loan Notes must be outside the United States,
Australia, Canada or Japan. Documents of title in respect of the Loan Notes will
not be sent to addresses in the United States, Australia, Canada or Japan.
8 Modifications
The Noteholders will have power by extraordinary resolution of the Noteholders
passed in accordance with the provisions of the Loan Note Instrument or by
resolution in writing signed by holders of not less than 75 per cent. of the
outstanding Loan Notes, inter alia, to sanction any abrogation, modification or
compromise or arrangement in respect of their rights against the Offeror and/or
RWE and to assent to any amendment of the provisions of the Loan Note
Instrument. The Offeror may, with the consent of its financial advisers, amend
the provisions of the Loan Note Instrument, without such sanction or consent, if
such amendment is of a formal, minor or technical nature or to correct a
manifest error.
9 Substitution of Principal Debtor
The Loan Note Instrument will contain, inter alia, provisions enabling the
Offeror to substitute any member or members of the Offeror's group as the
principal debtor or debtors under the Loan Notes provided that the Offeror's
right to require substitution of such member or members as principal debtor will
be exercisable
51
only if prior clearance has been obtained from the Inland Revenue to the effect
that the substitution will not be treated as a disposal of the Loan Notes for
the purposes of United Kingdom taxation of chargeable gains.
10 No Listing
No application has been made or is intended to be made to any stock exchange for
the Loan Notes to be listed or otherwise traded.
11 Governing Law
The Loan Notes and the Loan Note Instrument will be governed by and construed in
accordance with English law.
12 Guarantee
Payment of principal and interest on the Loan Notes will be guaranteed by RWE.
52
APPENDIX III
Financial Information on the Innogy Group
Financial Information of the Innogy Group for the three years ended 31 March
2001 The following financial information has been extracted from the Annual
Report and Accounts 2001 and the Annual Report on form 20-F 2001.
Consolidated Profit and Loss Account
March 2001 March 2000 March 1999
Statutory Proforma Statutory Proforma Proforma
Audited Unaudited Audited Unaudited Unaudited
Note (pound)m (pound)m (pound)m (pound)m (pound)m
Turnover 2.2 3,884 3,859 142 2,628 2,632
Operating profit/(loss) 289 280 (234) (762) 645
Pre exceptional operating profit 2.2 292 283 28 311 645
Profit/(loss) before tax* 301 218 (255) (858) 559
Taxation (1) (1) (1) 41 (133)
Profit/(loss) after tax* 300 217 (256) (817) 426
Exceptional items 2.3 56 (3) (262) (1,073) n/a
Dividends (109) (85) n/a n/a n/a
Basic EPS* 26.8p 19.3p n/a n/a n/a
DPS 7.5p 7.5p n/a n/a n/a
*after exceptional items (note 2.3)
There is no comparative earnings per share or dividend per share information as
the group previously formed part of National Power PLC.
Consolidated Balance Sheet
March 2001
Audited
(pound)m
Intangible assets 577
Tangible assets 1,260
Fixed asset investments 32
--------
Total fixed assets 1,869
--------
Stocks 69
Debtors 978
Investments, cash and short term deposits 241
Creditors: amounts falling due within one year (772)
--------
Net current assets 516
--------
Total assets less current liabilities 2,385
Creditors: amounts falling due after more than one year (1,210)
Provisions for liabilities and charges (567)
--------
Net assets employed 608
========
Share capital 112
Capital reserve 17
Profit and loss account 479
--------
Shareholders' funds - equity 608
========
53
Consolidated Cashflow Statement
March 2001 March 2001
Statutory Proforma
Audited Unaudited
Note (pound)m (pound)m
Net cash outflow from operating activities 2.5 (779) (371)
Dividends received from associates and joint ventures 2 2
Returns on investments and servicing of finance (71) (86)
Tax -- --
Dividends paid (52) (28)
Capital expenditure and financial investment 2.5 13 (187)
Acquisitions and disposals 2.5 (40) (17)
-------- --------
Net cash outflow before liquid resources and financing activities (927) (687)
Management of liquid resources 387 387
Financing activities 429 (394)
-------- --------
Decrease in cash (111) (694)
======== ========
NOTES TO THE FINANCIAL INFORMATION ON THE INNOGY GROUP
1 Changes in accounting policies
Since the publication of the financial statements from which the above have been
extracted, Innogy has changed its accounting policies in respect of its energy
trading contracts and deferred taxation. The new policies and their impact are
set out in the September 2001 interim financial statements which are reproduced
in section 5.
54
2 Significant Notes to the Accounts
2.1 Reconciliation of statutory accounts to proforma accounts for year to March
2001
March 2001
March 2001 March 2001 Proforma
Statutory Proforma Accounts
Audited Note Adjustment Unaudited
(pound)m (pound)m (pound)m
Turnover 3,884 (25) 3,859
Operating costs before exceptional items (3,595) 16 (3,579)
Exceptional operating items (3) -- (3)
-------- -------- --------
Operating profit 286 A (9) 277
Share of operating profit of associates and joint ventures 3 -- 3
-------- -------- --------
Total operating profit of the Group 289 (9) 280
Exceptional items 59 A (59) --
-------- -------- --------
Profit on ordinary activities before interest and taxation 348 (68) 280
Pre-exceptional profit on ordinary activities before
interest and taxation 292 (9) 283
Exceptional items 56 (59) (3)
Net interest payable and similar charges (47) B (15) (62)
-------- -------- --------
Profit on ordinary activities before taxation 301 (83) 218
Taxation (1) -- (1)
-------- -------- --------
Profit on ordinary activities after taxation 300 (83) 217
Dividends (109) B 24 (85)
-------- -------- --------
Retained profits 191 (59) 132
======== ======== ========
Adjustments made in deriving the proforma profit and loss account for the year
to 31 March 2001 are as follows:
A To remove the operating profit of (pound)9 million and exceptional profit
on disposal of (pound)59 million derived from Deeside power station which
was transferred to International Power plc in July 2000.
B To reclassify intercompany payments made by way of dividend to
International Power plc prior to demerger primarily in respect of interest
on debt finance and profits from Deeside power station.
The statutory profit and loss account for March 2000 is for the period from 16
March 2000 to 31 March 2000. A proforma adjustment has been made to include the
earnings for the period from 1 April 1999 to 15 March 2000. The proforma results
for the year then reflect the results as set out in the Innogy Listing
Particulars dated 21 August 2000.
55
2.2 Segmental Analysis
By Class of Business
2001 2001
Statutory Proforma
Audited Unaudited
Turnover PBIT Turnover PBIT
(pound)m (pound)m (pound)m (pound)m
Trading and Asset Management 1,811 218 1,786 211
Operations and Engineering 247 6 247 6
Retail 1,940 49 1,940 49
Cogen and Renewables 167 16 167 16
Eastern Lease 106 81 106 81
New Ventures -- (17) -- (17)
Head office and other Corporate costs -- (41) -- (43)
Central items -- (23) -- (23)
Intra group (387) -- (387) --
-------- -------- -------- --------
3,884 289 3,859 280
======== ========
Associates and joint ventures 3 3
-------- --------
PBIT before exceptional items 292 283
======== ========
2000 2000
Statutory Proforma
Audited Unaudited
Turnover PBIT Turnover PBIT
(pound)m (pound)m (pound)m (pound)m
Trading and Asset Management 87 26 1,081 207
Operations and Engineering -- -- 189 --
Retail 50 -- 1,327 1
Cogen and Renewables 5 -- 120 16
Eastern Lease -- -- 200 167
New Ventures -- -- -- (12)
Head office and other Corporate costs -- (1) -- (58)
Central items -- -- -- (13)
Intra group -- -- (289) --
-------- -------- -------- --------
142 25 2,628 308
======== ========
Associates and joint ventures 3 3
-------- --------
PBIT before exceptional items 28 311
======== ========
56
2.2 Segmental Analysis (continued)
By Class of Business (continued)
1999
Proforma
Unaudited
Turnover PBIT
(pound)m (pound)m
Trading and Asset Management 1,896 519
Operations and Engineering 198 -
Retail 446 10
Cogen and Renewables 93 13
Eastern Lease 224 187
New Ventures - (11)
Head office and other Corporate costs - (83)
Central items - 5
Intra group (225) -
-------- --------
2,632 640
========
Associates and joint ventures 5
--------
PBIT before exceptional items 645
========
Comprising:
Continuing operations 1,565 292
Discontinued operations 1,067 353
-------- --------
2,632 645
======== ========
2.3 Exceptional Items
Total exceptional items before taxation
2001 2001 2000 2000
Statutory Proforma Statutory Proforma
Audited Unaudited Audited Unaudited
(pound)m (pound)m (pound)m (pound)m
Eastern lease 237 237 -- --
Teesside PPA buyout (206) (206) -- --
Plant closure costs (19) (19) 11 11
Demerger costs (15) (15) -- --
Gas provision and swap -- -- (69) (794)
Impairment of stations -- -- (193) (261)
Retail reorganisation costs -- -- (11) (29)
-------- -------- -------- --------
Exceptional items included with operating costs (3) (3) (262) (1,073)
Profit on disposal of UK power station 59 -- -- --
-------- -------- -------- --------
Exceptional items before taxation 56 (3) (262) (1,073)
======== ======== ======== ========
In the year to March 2001 the Eastern Lease contract renegotiations resulted in
the existing lease arrangement being terminated. The deferred income for the
period to March 2003 was released as an exceptional credit to the profit and
loss account. In addition, a premium was paid by TXU which was treated as an
exceptional credit in the profit and loss account. In addition, the Power
Purchase Agreement with Teesside was bought out at a cash cost of (pound)517
million. This was charged against the existing provision with the balance of
(pound)206 million treated as exceptional. Plant closure costs and related
severance, in relation to Blyth power station totalling (pound)19 million were
incurred in the year.
57
2.3 Exceptional Items (continued)
In the 2000 proforma accounts an exceptional charge of (pound)495 million was
made in relation to that part of the Group's long-term gas supply contracts,
established in the early 1990's at prices substantially higher than current
market prices. This provision represents the estimated loss that will be
incurred in future periods as a result of the sales, through the Group's retail
gas business, of gas it is committed to purchase under its long-term supply
contracts. In addition, the Group paid (pound)299 million to secure price
modifications to the contracted gas supply not covered by the provision. These
price modifications, effected by the use of gas swaps, broadly have the effect
of changing the contract price of gas burned in the Group's power stations to
approximate the current market price.
The other significant exceptional item in the proforma 2000 accounts arose
following the disposal of a significant element of the UK power plant portfolio
and a reappraisal of the UK power market; the Group conducted impairment reviews
of its older coal and oil fired power stations and associated assets. As it was
not possible to make a reasonable estimate of the net realisable value, these
assets were written down to their value in use.
There were no exceptional items in 1999.
2.4 Net Debt
2001 Statutory
Other 31 March
31 March non-cash (inflow)/ 31 March
2000 movements outflow 2001
(pound)m (pound)m (pound)m (pound)m
Cash
Cash at bank 227 -- (187) 40
Short-term deposits -- -- 83 83
-------- -------- -------- --------
227 -- (104) 123
Bank overdrafts repayable on demand (1) -- (7) (8)
-------- -------- -------- --------
Net cash 226 -- (111) 115
-------- -------- -------- --------
Liquid resources
Current asset investments 506 (1) (387) 118
-------- -------- -------- --------
Debt financing
105/8% Euro Sterling Bond 2001 -- 4 (4) -
83/8% Euro Sterling Bonds 2006 -- 1 (315) (314)
81/8% Euro Sterling Bonds 2022 -- 1 (220) (219)
8.02% EIB Loan 2006 -- 1 (312) (311)
Finance leases: less than one year (11) -- 4 (7)
more than one year (409) -- 51 (358)
-------- -------- -------- --------
Gas swap creditor (140) -- 140 -
-------- -------- -------- --------
Total debt financing (560) 7 (656) (1,209)
-------- -------- -------- --------
Net cash/(debt) 172 6 (1,154) (976)
======== ======== ======== ========
Debt/equity ratio +27% -161%
======== ========
58
2.4 Net Debt (continued)
Reconciliation of net cash flow to movement in net debt
2001
Statutory
Audited
(pound)m
Decrease in cash in the period (111)
Cash inflow from increase in debt and lease financing (656)
Cash outflow from increase in liquid resources (387)
--------
Change in net debt resulting from cash flows (1,154)
Other non-cash movements 6
--------
Movement in net debt in the year (1,148)
Net cash at the start of the year 172
--------
Net debt at the end of the year (976)
========
2.5 Cashflow
(a) Reconciliation of operating profit to net cash outflow from operating
activities
2001 2001
Statutory Proforma
Audited Unaudited
(pound)m (pound)m
Operating profit 286 277
Tangible fixed asset depreciation charged to profit and loss 142 142
Other non-cash movements 21 21
Revaluation of current asset investments 1 1
Goodwill amortisation 31 31
(Profit)/loss on disposal of fixed assets (22) 37
Profit on disposals of power station 59 --
Movement in working capital:
Increase in stocks (23) (23)
Increase in debtors (400) (400)
Decrease in creditors (429) (12)
Provisions utilised (164) (164)
Provisions utilised-exceptional (303) (303)
Provisions charged to profit and loss 3 3
Provisions charged to profit and loss exceptional 19 19
-------- --------
Net cash outflow from operating activities (779) (371)
======== ========
59
2.5 Cashflow (continued)
(b) Capital expenditure and financial investment 2001 2001
Statutory Proforma
Audited Unaudited
(pound)m (pound)m
Purchase of tangible fixed assets (189) (189)
Sale of fixed assets 201 1
Loans repaid by associates and joint ventures 1 1
-------- --------
Cash inflow/(outflow) 13 (187)
======== ========
(c) Acquisitions and disposals
2001 2001
Statutory Proforma
Audited Unaudited
(pound)m (pound)m
Acquisitions (17) (17)
Investment in associates (4) --
Investment in joint ventures (19) --
-------- --------
Cash outflow (40) (17)
======== ========
3 Accounting Policies
The following accounting policies have been applied consistently, except as
noted below, in dealing with items which are considered material in relation to
the Group's financial statements.
(i) Basis of preparation of accounts
The financial statements of Innogy Holdings plc and its subsidiary undertakings
(the Group) are prepared under the historical cost convention and in accordance
with applicable Accounting Standards.
(ii) Basis of consolidation
The accounting treatment for the demerger of Innogy from National Power PLC is
set out in note (iii) below. The consolidated financial statements include the
financial statements of the Company and all of its subsidiary undertakings up to
31 March 2001. The acquisition method of accounting has been adopted where
appropriate. Under this method, the results of subsidiary undertakings acquired
or disposed of in the year are included in the consolidated profit and loss
account from the date of acquisition or up to the date of disposal. An associate
is an undertaking in which the Group has a long-term participating interest,
usually between 20 per cent. to 50 per cent. of the equity voting rights, and
over which it exercises significant influence. A joint venture is an undertaking
in which the Group has a long-term interest and over which it exercises joint
control. The Group's share of the profits less losses of associates and of joint
ventures is included in the consolidated profit and loss account and its
interest in their net assets is included in fixed asset investments in the
circumstances indicate that the carrying values may not be recoverable. On the
subsequent disposal or termination of a business, the profit or loss on disposal
or termination is calculated after charging/(crediting) the unamortised amount
of any related goodwill. In the Company's financial statements, the investments
in subsidiary undertaking, is stated at cost less amounts written off.
60
3 Accounting Policies (continued)
(iii) Basis of preparation - merger accounting
The financial statements have been prepared under merger accounting principles
in relation to the merger of Innogy Holdings plc and Innogy plc on 2 October
2000. Under merger accounting, the results and cash flows of Innogy Holdings plc
and Innogy plc are combined from the beginning of the financial period in which
the merger occurred. Profit and loss account and balance sheet comparatives are
restated on the combined basis. Innogy Holdings plc was incorporated on 8 May
2000 and is the new parent company of the Group. Accordingly there are no parent
company comparative figures included in these accounts which are the first for
the parent company itself. On 16 March 2000 Innogy plc acquired the assets and
liabilities which were to form the business of Innogy from demerger.
Accordingly this date is deemed to be the commencement of Innogy's operations
for statutory accounting purposes.
Additional unaudited financial information is included in respect of the 12
month periods ended 31 March 2000 and 2001. In the case of the period ended 31
March 2000, this information is substantially extracted from the Listing
Particulars dated 21 August 2000 in connection with the introduction of Innogy
Holdings plc to the Official List. This information represents a `carve-out'
from National Power PLC of the assets and liabilities of Innogy plc prior to the
hive-down date of 16 March 2000. In respect of the period ended 31 March 2001,
the statutory information has been adjusted to take account of the following
items:
(a) Exclusion of the trading results and profits on disposal of Deeside power
station which was transferred back to National Power PLC prior to demerger
of Innogy plc.
(b) Reclassification of payments made by Innogy plc to National Power PLC prior
to demerger.
These payments were made by way of dividend but remunerated National Power
PLC for interest borne on Innogy's behalf.
(c) Inclusion, for the entire period, of debt actually transferred to Innogy
plc from National Power PLC on 28 September 2000.
(iv) Turnover
Group turnover comprises sales to the electricity trading market in England and
Wales (the Pool) of electricity generated by the Group, retail sales of gas and
electricity to domestic and small commercial customers and direct sales to large
consumers of electricity purchased through the Pool. On 27 March 2001 the NETA
came into effect, the new rules replace the Pool and our turnover comprises five
days of sales under those arrangements. Turnover also includes sales relating to
our energy trading activity.
The value of the Group's sales through the Pool is substantially hedged by means
of Contracts for Differences (CfDs) with purchasers from the Pool (including the
Group's own retail business) that cover energy output and capacity. Turnover is
shown inclusive of third party fees receivable and net of the difference
payments under these CfDs. With the advent of NETA, Grid Trade Master Agreements
(GTMAs) were introduced as the principal hedging mechanism. Income attributable
to CfDs and GTMAs is recognised when settlement is made. Income from trading is
recognised when the position is closed and settlement made. Income from the sale
of electricity and gas to industrial, commercial and domestic customers is
recognised when earned and reflects the value of units supplied, including the
estimated value of units supplied to customers between the date of their last
meter reading and the year end.
(v) Pension costs
Pension contributions are charged to the profit and loss account so as to spread
the cost of pensions over employees' working lives. The regular cost is
attributed to individual years using the projected unit credit method.
Variations in pension costs, which are identified as a result of actuarial
valuations, are amortised over the average expected remaining working lives of
employees. Differences between the amounts funded and the amounts charged to the
profit and loss account are treated as either provisions or prepayments in the
balance sheet.
61
(vi) Research and development
Expenditure on fixed assets used for research and development is written off
over the expected useful life of the relevant asset; all other research and
development expenditure is charged to the profit and loss account as incurred.
(vii) Operating leases
Rentals payable under operating leases are charged to the profit and loss
account evenly over the term of the lease.
Contracts under which power stations were leased to third parties were
terminated in January 2001 and the assets were sold. Until then the accounting
policy was: amounts receivable in respect of power stations held under operating
leases were credited to profit and loss on a systematic basis over the primary
lease period in which payments are received. Fixed lease premium under operating
leases were credited to profit and loss evenly over the term of the primary
lease period. Other elements of the premium, including those contingent upon the
electricity output of the power stations, were credited to profit and loss as
they arose. Power stations under operating leases were shown within tangible
fixed assets less accumulated depreciation. Depreciation was provided on a
straight-line basis to write off the cost of the assets to their residual value
evenly over the term of the primary lease period.
(viii) Foreign exchange
The profits or losses of overseas subsidiary undertakings and associates are
translated into sterling at average rates of exchange. Balance sheets of
subsidiary undertakings and net investments in associates are translated at
closing rates.
Exchange differences arising on the retranslation at closing rates of overseas
subsidiary undertakings' balance sheets and net investments in associates and
joint ventures, together with the year end adjustment to convert the balance of
retained profits to closing rates, are taken directly to reserves. Differences
arising on the translation of relevant foreign currency borrowings are taken
directly to reserves, to match the corresponding exchange difference on the
translation of the related net investment in overseas subsidiary undertakings,
associates and joint ventures, as are differences arising on equity investments
denominated in foreign currencies in the Company's accounts. Transactions
denominated in foreign currencies arising in the normal course of business are
translated into sterling at the exchange rate ruling on the date payment takes
place unless related or matching forward foreign exchange contracts have been
entered into, when the rate specified in the contract is used. Monetary assets
and liabilities expressed in foreign currencies that are not covered by hedging
arrangements are translated into sterling at the rates of exchange ruling at the
balance sheet date and any difference arising on the retranslation of those
amounts is taken to the profit and loss account.
(ix) Interest
Interest on borrowings relating to major capital projects with long periods of
development is capitalised during construction and written off as part of the
total cost over the useful life of the asset. All other interest is charged to
the profit and loss account. The interest capitalised does not exceed the actual
net interest charge for the year. Under FRS 12 (Provisions, Contingent
Liabilities and Contingent Assets) the interest charge on discounted provisions
is included in the net interest charge.
(x) Tangible fixed assets
Tangible fixed assets are stated at original cost less accumulated depreciation
and any provision for impairment in value. In the case of assets constructed by
the Group, cost includes related works and administrative overheads,
commissioning costs and borrowing costs as per FRS 15. Assets in the course of
construction are included in tangible fixed assets on the basis of expenditure
incurred at the balance sheet date.
62
3 Accounting Policies (continued)
Depreciation is calculated so as to write down the cost of tangible fixed assets
to their residual value evenly over their estimated useful lives. Estimated
useful lives are reviewed periodically, taking into account commercial and
technological obsolescence as well as normal wear and tear, provision being made
for any impairment in value.
The depreciation charge is based on the following estimates of useful lives:
Years
Power stations under operating leases (primary lease term) 7
Combined cycle gas turbine power stations 25
Other power stations 20-40
Non-operational buildings 40
Fixtures, fittings, tools and equipment 4-5
Computer equipment and software 3-5
Hot gas path CCGT turbine blades 3
Freehold land is not depreciated.
(xi) Finance leases
Assets held under finance leases are capitalised where material and included in
tangible fixed assets at fair value at the inception of the lease. Each asset is
depreciated over the shorter of its lease term and its estimated useful life.
The obligations related to finance leases, net of finance charges in respect of
future periods are included, as appropriate, under creditors due within or
creditors due after one year. The interest element of the rental obligation is
allocated to accounting periods during the lease term so as to produce a
constant periodic rate of charge on the balance outstanding.
(xii) Fixed asset investments
All fixed asset investments are stated at cost less provision for any
impairment.
(xiii) Current asset investments
Current asset investments are stated at the lower of cost and market value.
(xiv) Stocks
Operating stocks of fuel and stores are valued at the lower of cost and net
realisable value.
(xv) Deferred taxation
Deferred taxation arises in respect of items where there is a timing difference
between their treatment for accounting purposes and their treatment for taxation
purposes. Provision for deferred taxation, using the liability method, is made
to the extent that it is probable that the liability or asset will crystallise
in the foreseeable future.
63
4 Interim Financial Statements
INNOGY HOLDINGS PLC
CONSOLIDATED UNAUDITED ACCOUNTS
For the half year ended 30 September 2001
GROUP PROFIT AND LOSS ACCOUNT
Half Year Full Year
2000/2001 2000/2001
Half Year Restated Restated
001/2002 Proforma Proforma
Note (pound)m (pound)m (pound)m
Turnover: Continuing operations 1,071 1,262 2,971
Acquisitions 491 -- --
-------- -------- --------
Total turnover 2 1,562 1,262 2,971
Operating costs
Exceptional operating costs -- (233) (3)
Goodwill amortisation (38) (14) (36)
Other operating costs (1,418) (1,162) (2,654)
-------- -------- --------
Total operating costs (1,456) (1,409) (2,693)
-------- -------- --------
Operating profit/(loss) 106 (147) 278
Share of operating profit of associates and joint ventures 2 2 3
-------- -------- --------
Total operating profit /(loss) of the Group 108 (145) 281
Continuing operations 83 (145) 281
Acquisitions 25 -- --
Profit on ordinary activities before exceptional items,
interest and tax 2 108 88 284
Profit on sale of fixed assets 3 8 -- --
Exceptional items 3 -- (233) (3)
-------- -------- --------
Profit/(loss) on ordinary activities before interest and taxation 116 (145) 281
Net interest payable and similar charges
Group (61) (29) (62)
Associates and joint ventures (1) (1) --
-------- -------- --------
Profit/(loss) on ordinary activities before taxation 54 (175) 219
Taxation (2) (5) (12)
-------- -------- --------
Profit/(loss) on ordinary activities after taxation 52 (180) 207
Dividends 4 (30) (28) (85)
-------- -------- --------
Retained profits/(losses) for the period 22 (208) 122
======== ======== ========
Basic earnings per share after taxation (EPS): 5
Before exceptional items and fixed asset sales 3.9p 4.7p 18.8p
Attributable to exceptional items and fixed asset sales 0.7p (20.7)p (0.3)p
-------- -------- --------
After exceptional items and fixed asset sales 4.6p (16.0)p 18.5p
-------- -------- --------
Before exceptional items, fixed asset sales, goodwill
amortisation and Eastern lease earnings 7.3p 1.3p 14.7p
======== ======== ========
Diluted EPS after exceptional items, fixed asset sales
and taxation 4.6p (16.0)p 18.4p
======== ======== ========
Dividends per share 4 2.625p 2.5p 7.5p
Dividend cover before exceptional items and fixed asset sales 1.5 times 1.9 times 2.5 times
Interim Financial Statements (continued)
64
4 Interim Financial Statements (continued)
INNOGY HOLDINGS PLC
CONSOLIDATED UNAUDITED ACCOUNTS
For the half year ended 30 September 2001
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half Year
2000/2001
Half Year Restated
2001/2002 Proforma
(pound)m (pound)m
Profit/(loss) attributable to members of the company 22 (208)
-------- --------
Total recognised gains and losses related to the period 22 (208)
--------
Prior period adjustments (see note 1)
FRS19 - Deferred taxation (40)
Mark to market accounting for Trading (4)
--------
Total gains and losses recognised since the last annual report (22)
========
BALANCE SHEETS
30 September 31 March
2000 2001
30 September Restated Restated
2001 Proforma Proforma
(pound)m (pound)m (pound)m
Intangible assets 1,841 583 577
Tangible assets 1,351 1,297 1,260
Fixed asset investments 74 34 32
-------- -------- --------
Total fixed assets 3,266 1,914 1,869
-------- -------- --------
Stocks 117 77 69
Debtors 2,091 1,019 1,407
Investments, cash and short-term deposits 222 754 241
Creditors: amounts falling due within one year (1,204) (1,139) (1,089)
-------- -------- --------
Net current assets 1,226 711 628
-------- -------- --------
Total assets less current liabilities 4,492 2,625 2,497
Creditors: amounts falling due after more than one year (3,355) (2,161) (1,819)
Provisions for liabilities and charges (545) (231) (114)
-------- -------- --------
Net assets employed 592 233 564
-------- -------- --------
Share capital 112 112 112
Other reserves 480 121 452
-------- -------- --------
Total equity 592 233 564
======== ======== ========
65
4 Interim Financial Statements (continued)
INNOGY HOLDINGS PLC
CONSOLIDATED UNAUDITED ACCOUNTS (CONTINUED)
For the half year ended 30 September 2001
MOVEMENT IN SHAREHOLDERS' FUNDS
Half Year
2000/2001
Half Year Restated
2001/2002 Proforma
(pound)m (pound)m
Profit for the period, before exceptional items 52 53
Ordinary dividends (30) (28)
Exceptional items -- (233)
Share premium 6 --
-------- --------
Net increase/(decrease) in shareholders' funds 28 (208)
Shareholders' funds at 31 March 2001 564 441
-------- --------
Shareholders' funds at 30 September 2001 592 233
======== ========
CASH FLOW STATEMENTS
Half Year
2000/2001
Half Year Restated
2001/2002 Proforma
Note (pound)m (pound)m
Net cash inflow/(outflow) from operating activities 6 113 (289)
Returns on investment and servicing of finance (43) (35)
Dividends paid (57) --
Capital expenditure and financial investment (68) (114)
Acquisitions and disposals (1,379) (12)
-------- --------
Net cash outflow before liquid resources and financing activities (1,434) (450)
Management of liquid resources 23 392
Financing activities 1,394 (140)
-------- --------
Decrease in cash (17) (198)
======== ========
NET DEBT
Half Year
2000/2001
Half Year Restated
2001/2002 Proforma
(pound)m (pound)m
Decrease in cash 17 198
Decrease in liquid resources 23 392
Increase/(decrease) in financing debt 1,392 (140)
Non-cash movements (33) --
-------- --------
Net increase in debt 1,399 450
Net debt at 31 March 2001 976 296
-------- --------
Net debt at 30 September 2001 2,375 746
-------- --------
Debt/equity ratio 401% 320%
66
NOTES TO THE ACCOUNTS
1. Accounting policies
Except as disclosed below, the accounts for the half year ended 30 September
2001 have been prepared using the same accounting policies as those adopted in
the accounts for the financial year ended 31 March 2001.
The comparative figures for the financial year ended 31 March 2001 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the Registrar of Companies.
The report of the auditors was unqualified and did not contain a statement under
Section 237(2) or (3) of the Companies Act 1985.
The comparative figures have been restated to reflect the adoption of the
following changes to accounting policies:
Mark to Market of Energy Trading Activities
The Directors consider that it is now more appropriate to account for our
Trading activities using mark to market accounting principles. The previous
treatment has been to account for energy-based derivative instruments as hedges
which were accounted for on an accruals basis with disclosure of the fair value
of the derivatives within the notes to the accounts. The new policy adopts a
mark to market approach for the valuation of all energy-based derivative
instruments held in Trading, with movements in valuation recorded in the group
profit and loss account.
Transactions for risk management purposes are undertaken between business units
within the Group, one of which is Trading. Internal positions are integral to
the Group's management of wholesale energy risk, ensuring risk can be managed on
a portfolio basis and offsetting positions within the Group can be recognised.
Internal transactions are included within the segmental analysis of performance
in Note 2 of the accounts. The transfer of risk through internal transactions
occurs at market prices on an arm's length basis and in accordance with hedge
policies approved by the Board.
Generation Hedge Policy
The transfer of energy market risk from the generation business into the
appropriate trading desk is performed under a hedge policy approved by the board
and monitored by the Group's risk management committee. Future exposure to
energy markets arising from generation activities is transferred to the trading
desk on a rolling basis, consistent with market liquidity assessments performed
routinely.
Retail Hedge Policy
The transfer of energy market risk from the retail business into the appropriate
trading desk is performed under a hedge policy approved by the Board and
monitored by the Group's risk management committee. Future exposure to wholesale
energy markets arising from retail activities is transferred to the trading desk
on a rolling basis consistent with market conditions, using an assessment of the
expected retail customer demand and sensitivity of customer tariffs to wholesale
prices.
The impact of this change in accounting policy on the financial statements is
that all of our trades are shown with sale and purchase being shown net of each
other. If a contract is `in the money' then a debtor is created and `out of the
money' a creditor is created. Only the amount in or out of the money is recorded
in the Balance Sheet rather than the underlying principal of the contract. The
retail gas provision is no longer required as the onerous contract previously
provided for is now marked to market. The provision put through the profit and
loss account in prior years has been reversed.
67
1. Accounting policies (continued)
The impact on the accounts is summarised below.
Half Year Half Year Full Year
2001/2002 2000/2001 2000/2001
(pound)m (pound)m (pound)m
Profit and Loss Account
Turnover (566) (311) (888)
Cost of sales 568 279 889
-------- -------- --------
Profit before interest and tax 2 (32) 1
-------- -------- --------
Balance Sheet
Debtors: amounts due within one year 296 2 251
Debtors: amounts due after one year 328 294 208
Creditors: amounts due within one year (338) (78) (317)
Creditors: amounts due after one year (713) (728) (571)
-------- -------- --------
Ongoing mark to market accounts (427) (510) (429)
-------- -------- --------
Release of retail gas provision 473 453
Release of prepayment balance on option premiums - (28)
-------- -------- --------
(37) (4)
======== ========
The balance sheet at September 2001 includes the market value of all trades at a
net (pound)427 million. The movement on these accounts is (pound)2 million. This
movement has been included in the Trading profit for the period of (pound)26
million. The balance sheet position at March 2001 was (pound)429 million.
Deferred Taxation
FRS 19 - accounting for deferred taxation has been adopted. This requires full
provisioning for deferred tax rather than the partial provisioning approach
under SSAP 15. The (pound)2 million deferred tax asset previously held was
reversed and a deferred tax creditor has been established of (pound)38 million
as at 31 March 2001. The prior year Balance Sheet has been adjusted by (pound)40
million. The deferred tax charge for the period is (pound)2 million; the
comparative period charge has been restated to (pound)5 million.
68
2. Group segmental analysis
The presentation of the group segmental analysis has been changed this year to
reflect better the true performance of individual business segments. Trading and
Asset Management are now shown separately. Items of (pound)11 million previously
disclosed as head office costs and central items have been transferred to the
business divisions that receive the benefit of these services. Expenditure of
(pound)6 million on our Regenesys technology previously disclosed in New
Ventures has now been separately presented.
Half-year
Half-year 2000/2001
2001/2002 Turnover PBIT
Turnover PBIT Restated Restated
(pound)m (pound)m (pound)m (pound)m
Retail 1,378 47 723 12
Asset Management 254 46 324 70
Trading and Risk Management Services 69 26 (12) (15)
Operations and Engineering 114 3 103 2
Cogen and Renewables 62 4 68 --
Eastern lease -- -- 68 52
Regenesys 1 (12) -- (6)
New Ventures -- (2) -- (1)
Head office and other corporate costs -- (9) -- (20)
Central items -- 3 -- (8)
Intra group (316) -- (12) --
-------- -------- -------- --------
1,562 106 1,262 86
======== ========
Associates & Joint Ventures 2 2
-------- --------
Profit before interest, tax and exceptional items 108 88
======== ========
3. Exceptional items
There were no exceptional items in the period. Non operating profits in the
period on the sale of a property, totalling (pound)8 million, have been
separately disclosed. Exceptional items totalling (pound)233 million were
charged to the profit and loss account in the period to September 2000. These
costs related to the buyout of the Teesside power purchase agreement of
(pound)206 million, costs associated with the closure of Blyth power station of
(pound)21 million and demerger costs of (pound)6 million.
4. Dividends
Half Year Half Year
2001/2002 2000/2001
(pound)m (pound)m
Per ordinary share:
Interim dividend of 2.625p (2.5p in 2000/2001) 30 28
======== ========
The interim dividend will be paid on 16 January 2002 to shareholders on the
register on 7 December 2001. The shares will go ex-dividend on 5 December 2001.
69
5. Earnings per share
Basic earnings per share for the period of 4.6p is based on profits of (pound)52
million, attributable to ordinary shareholders, divided by 1,124 million
ordinary shares. On a fully diluted basis, the weighted average number of shares
was 1,133 million.
6. Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
Half Year Half Year
2001/2002 2000/2001
(pound)m (pound)m
Operating profit/(loss) 106 (147)
Tangible fixed asset depreciation charged to profit and loss 44 56
Other non-cash movements 11 22
Other amortisation 38 14
Movement in working capital:
Increase in stocks (43) (31)
Increase in debtors (53) (111)
Increase in creditors 7 209
Provisions utilised (23) (322)
Provisions charged to profit and loss 26 21
-------- --------
Net cash inflow/(outflow) from operating activities 113 (289)
======== ========
7. Acquisitions
During the period the group made the following acquisitions, all of which have
been accounted for under the acquisition method of accounting:
(i) Yorkshire retail business
In April 2001 the acquisition of 94.75 per cent. of Yorkshire Power Group (YPG)
was completed. In September 2001 we divested the Distribution business as part
of a 'swap' arrangement for the retail business of Northern Electric. This
divestment was achieved by selling our stake in YPG whilst retaining 100 per
cent. of the Yorkshire retail business.
The net consideration for the Yorkshire retail business and corresponding
goodwill was:
(pound)m (pound)m
Consideration, including debt repaid 981
Assets/(liabilities) acquired at fair
value:
Tangible fixed assets 90
Fixed asset investments 46
Pension scheme prepayment 100
Provisions (75)
Working capital 125
--------
(286)
--------
Goodwill, to be amortised over 20 years 695
========
70
7. Acquisitions (continued)
(ii) Northern retail business
In September 2001 the acquisition of the Northern retail business was completed
for a consideration of (pound)395 million, substantially satisfied by the fair
value of the Yorkshire distribution business and its associated debt.
The net consideration for the Northern retail business and corresponding
goodwill was:
(pound)m (pound)m
Consideration 395
Assets/(liabilities) acquired at fair value:
Tangible fixed assets 15
Stocks 5
Provisions (353)
Working Capital 124
--------
209
--------
Goodwill, to be amortised over 20 years 604
========
(iii) Electrosynthesis
In May 2001 the purchase of Electrosynthesis Inc was completed for a
consideration of (pound)10 million. This was all treated as goodwill and will be
amortised over 5 years.
71
APPENDIX IV
Financial Information on the RWE Group
Part A: Financial information on the RWE Group for the two years ended 30 June
2001 and the six months ended 31 December 2001 extracted from audited financial
statements
The financial information relating to the RWE Group set out below for the two
years ended 30 June 2001 and the six months ended 31 December 2001 has been
extracted, without material adjustment, from the English language version of the
audited consolidated financial statements of the RWE Group for each of the two
years ended 30 June 2001 and the six months ended 31 December 2001, which were
prepared in accordance with International Accounting Standards (IAS). The
auditors of RWE, PwC Deutsche Revision Aktiengesellschaft
Wirtschaftsprufungsgesellschaft, issued an unqualified audit report on those
financial statements. The complete financial information is available in RWE's
annual report published on 26 March 2002. The annual report is available from
RWEAG, Investor Relations, Opernplatz 1, D-45128, Essen, Germany.
Consolidated Income Statement
Six months
Year ended Year ended ended 31
30 June 30 June December
2000 2001 2001
EUR EUR EUR
Note million million million
Net sales (1) 47,918 62,878 33,301
Mineral oil tax/natural gas tax/electricity tax 5,492 6,127 3,281
-------- -------- --------
Net sales (excluding mineral oil tax/natural gas
tax/electricity tax) 42,426 56,751 30,020
Changes in finished goods and work in progress (80) (10) 206
Other own work capitalised 276 367 225
Other operating income (2) 3,049 3,589 2,406
Cost of materials 27,266 38,497 19,903
Staff costs 7,940 8,768 4,745
Depreciation and amortisation 2,419 3,412 1,837
Other operating expenses 7,917 6,859 4,620
-------- -------- --------
Profit from operating activities 129 3,161 1,752
Result of investments (3) 2,912 638 312(1)
Financial result (890) (1,561) (921)
-------- -------- --------
Profit before tax 2,151 2,238 1,143
Taxes on income 595 478 339
-------- -------- --------
Profit after tax 1,556 1,760 804
Minority interests 344 496 183
-------- -------- --------
Net profit 1,212 1,264 621
======== ======== ========
Earnings per share (EUR) (7) 2.24 2.24 1.10
Dividend per share (EUR) (7) 1.00 1.00(3) 1.00(2)
Dividend including tax credit per share (EUR) 1.43 1.43 --(4)
(1) EUR(23) million of which is profit allocable to financial assets accounted
for at equity (previous year: EUR567 million).
(2) Proposed dividend for the 2001 fiscal year of RWE AG (January through
December 2001) subject to approval by AGM on 6 June 2002.
(3) Dividend for the truncated fiscal year of RWE AG (July through December
2000).
(4) Dividends of RWE AG as of the 2001 fiscal year are subject to new tax laws
(the "half income system").
72
Consolidated Balance Sheet
30 June 31 December
2001 2001
EUR EUR
Assets Note million million
Fixed assets (4)
Intangible assets 8,351 8,502
Property, Plant and Equipment 31,720 32,310
Financial assets(1) 14,518 8,370
-------- --------
54,589 49,182
Current assets
Inventories 3,205 3,643
Accounts receivable and other assets 14,726 15,244
Securities 3,237 10,611
Cash and cash equivalents 3,052 3,842
-------- --------
24,220 33,340
Deferred taxes 8,056 8,399
Prepaid expenses 561 528
-------- --------
87,426 91,449
======== ========
30 June 31 December
2001 2001
EUR EUR
Equity and Liabilities Note million million
Equity/minority interests
Group interest -- --
Subscribed capital 1,459 1,459
Capital reserves 1,269 1,269
Retained earnings 4,312 4,440
Distributable profit 281 562
-------- --------
7,321 7,730
Minority interests 3,522 3,399
-------- --------
10,843 11,129
Provisions (5) 40,062 40,383
Liabilities(2) (6) 27,811 30,535
Deferred taxes 5,129 6,206
Deferred income 3,581 3,196
-------- --------
87,426 91,449
======== ========
(1) EUR4,614 million of which are allocable to financial assets accounted for
at equity (previous year: EUR4,963 million).
(2) EUR11,410 million of which are long-term interest-bearing liabilities
(previous year: EUR9,114 million).
73
Consolidated Cash Flow Statement
Six months
Year ended ended
30 June 31 December
2001 2001
EUR EUR
million million
Profit after tax 1,760 804
Depreciation, amortisation and writebacks 3,545 1,801
Increase in long-term provisions 430 440
Increase/decrease in deferred taxes (463) (179)
Other non-cash items (652) (502)
mainly equity accounting and result of fixed asset disposals
-------- --------
Cash flow 4,620 2,364
Increase/decrease in short-term provisions (68) (629)
Change in net working capital (590) (698)
Change in other balance sheet items (148) (16)
-------- --------
Net cash from operating activities 3,814 1,021
-------- --------
Intangible assets/property, plant and equipment
Capital expenditure (3,518) (2,295)
Proceeds from disposition of fixed assets 809 297
Acquisitions, investments and loans to associates
Capital expenditure (9,890) (1,411)
Proceeds from disposition of fixed assets/divestments 1,262 630
Changes in securities and cash investments 3,817 (1,340)
-------- --------
Net cash used in investing activities (7,520) (4,119)
-------- --------
Capital contributions to RWE AG and share of minority
interests in capital contributions to subsidiaries and
share buybacks of RWE Group companies (2,040)(1) 4
Dividends paid to RWE shareholders and minority interests (1,359) (236)
Cash inflow from increase in financial debt 10,674 6,956
Repayment of financial debt (4,873) (3,615)
-------- --------
Net cash provided by financing activities 2,402 3,109
-------- --------
Net change in cash and cash equivalents (1,304) 11
Effects of exchange rate changes and other changes in value (30) (27)
Effects of changes in the scope of consolidation on cash and
cash equivalents 1,574 806
-------- --------
Total net change in cash and cash equivalents 240 790
Cash and cash equivalents at beginning of reporting period 2,812 3,052
-------- --------
Cash and cash equivalents at end of reporting period 3,052 3,842
======== ========
(1) EUR(2,039) million of which are allocable to the acquisition of shares in
RWE (old) and VEW that were eliminated within the scope of the merger.
74
Statement of Changes in Equity and Minority Interests
Accumulated other
Comprehensive Income
----------------------
Marked-to-
market
Difference evaluation
from of
Capital currency financial Distribut
Subscribed reserve of Retained trans- in- -able Group Minority
capital RWE AG earnings lation struments profit interest interests Total
EUR EUR EUR EUR EUR EUR EUR EUR EUR
million million million million million million million million million
Balance as of 1 July 2000 1,340 1,697 2,643 163 -- 523 6,366 3,191 9,557
======= ======= ======= ======= ======= ======= ======= ======= =======
Share buybacks -- -- (2,045) -- -- -- (2,045) (4)
RWE/VEW merger (129) (180) 3,412 -- -- -- 3,103 456 3,559
Capital contributions 248 (248) -- -- -- -- -- 9 9
Dividends paid -- -- -- -- -- (1,078) (1,078) (281)
Other comprehensive income -- -- -- (33) -- -- (33) 45 12
Profit after tax -- -- 419 -- -- 845 1,264 496 1,760
Other changes -- -- (247) -- -- (9) (256) (390) (646)
------- ------- ------- ------- ------- ------- ------- ------- -------
Balance as of 30 June 2001 1,459 1,269 4,182 130 -- 281 7,321 3,522 10,843
======= ======= ======= ======= ======= ======= ======= ======= =======
Capital contributions -- -- -- -- -- -- -- 4 4
Dividends paid -- -- -- -- -- -- -- (236) (236)
Other comprehensive income -- -- -- 18 (22) -- (4) (40) (44)
Profit after tax -- -- 340 -- -- 281 621 183 804
Other changes* -- -- (935) -- 727 -- (208) (34) (242)
------- ------- ------- ------- ------- ------- ------- ------- -------
Balance as of 31 December 2001 1,459 1,269 3,587 148 705 562 7,730 3,399 11,129
======= ======= ======= ======= ======= ======= ======= ======= =======
* Other changes resulting from the marked-to-market valuation of financial
instruments are due to the fact that IAS 39 was applied for the first time.
Basis of presentation
International Accounting Standards valid as of the balance-sheet date were
applied when preparing the Consolidated Financial Statements. Furthermore, the
interpretations of the Standing Interpretations Committee (SIC) have been
observed.
IAS 39 "Financial Instruments - Recognition and Measurement," IAS 40 "Investment
Property" and the revised standards for income taxes (IAS 12, revised in 2000)
as well as for employee benefits (IAS 19, revised in 2000) that have become
mandatory for RWE as of 1 July 2001 were applied for the first time in the 2001
truncated fiscal year.
A Cash Flow Statement and a Statement of Changes in Equity and Minority
Interests have been disclosed in addition to the Income Statement and the
Balance Sheet. Moreover, statements made in the Notes include segment reporting.
Several Balance Sheet and Income Statement items have been combined in order to
improve clarity. The Income Statement has been prepared using the total output
method.
The Consolidated Financial Statements have been prepared in euros. All amounts
(unless specified otherwise) are stated in millions of euros (EURmillion).
The Financial Statements presented here cover the 2001 truncated fiscal year on
the basis of the reporting period from 1 July to 31 December 2001.
75
Scope of consolidation
Included in the Consolidated Financial Statements besides RWE AG are all
domestic and foreign subsidiaries in which RWE AG directly or indirectly holds
the majority of voting rights. Principal associates are accounted for using the
equity method.
If investments in subsidiaries, joint ventures or associates are of secondary
importance from a Group perspective, they are accounted for using the
acquisition cost method. Non-operating subsidiaries and those with small
business volumes are generally not consolidated. Altogether, they account for
less than 1 per cent. of consolidated sales and results.
Subsidiaries that have a different balance-sheet date prepare interim financial
statements.
A collective listing of the Group's investments in accordance to Sec. 313, Para.
2, Nos. 1 to 4 and Para. 3 of the German Commercial Code (HGB) has been filed in
the Commercial Register of the Essen District Court.
Twenty-one companies domiciled in Germany and 57 headquartered abroad were
consolidated for the first time in the year under review. Thirty-five
enterprises, including 18 abroad, have been deconsolidated, and 45, including 14
abroad, have been merged. Thirteen associates, including 9 abroad, were
accounted for at equity for the first time. Twenty-one enterprises, which had
been accounted for under the equity method in the previous year, including 8
abroad, have been sold, merged or fully consolidated. First-time consolidation
and deconsolidation generally takes place at the time of acquisition or sale of
the shares concerned.
As far as affiliates are concerned, the following share increases and
acquisitions deserve mention:
o Pocahontas Gas Partnership, USA; shareholding raised from 50 per cent. to
100 per cent.; acquisition cost: EUR173 million
o SSM Coal B.V., Netherlands; shareholding raised from 50 per cent. to 100
per cent.; acquisition cost: EUR23 million
o Purchased a 51 per cent. state in Empresa de Servicios Sanitarios del
Libertador, Chile; acquisition cost: EUR81 million
o Purchased Chile-based ESSAM's operations; acquisition cost: EUR207 million
o Thames (Shanghai) Limited, UK; shareholding raised from 50 per cent. to 100
per cent.; acquisition cost: EUR20 million
o Acquired an additional 23.47 per cent. of Harpen AG; acquisition cost:
EUR113 million
A total of EUR520 million was used to acquire stakes in companies that were
consolidated for the first time, EUR212 million of which were paid in cash or
cash equivalents. All in all, on balance, EUR539 million in fixed assets, EUR321
million in current assets (including deferred taxes), EUR423 million in cash and
cash equivalents as well as EUR798 million in liabilities and provisions were
assumed as a result of the acquisition and divestment of consolidated
enterprises.
As regards companies accounted for at equity, the following share acquisitions
should be highlighted:
o Kartner Energieholding Beteiligungs GmbH, Austria: 49 per cent.
o Iskenderun Enerji Uretim ve ticaret a.s., Turkey: 25 per cent.
o Glennies Creek Coal Mine, Australia: 50 per cent.
o AVG Abfallentsorgungs- und Verwertungsgesellschaft mbH, Cologne;
shareholding raised from 25 per cent. to 50 per cent.
The following sales of shareholdings are noteworthy:
o Divested the TOMAN Group
76
o Divested the Rheinelektra Group
o Divested HOCHTIEF Software GmbH
o Divested Elsen Entsorgung GmbH
Divested subsidiaries fetched a total selling price of EUR415 million, of which
EUR376 million were paid in cash or cash equivalents.
The sale of Lausitzer Braunkohle AG (LAUBAG) to Hamburgische-Electricitatswerke
AG took legal effect in July 2001. LAUBAG had been included in the Balance Sheet
only at amortised cost as of 1 July 2000, since the management of this company
had already been transferred to a trustee prior to the divestment.
Consolidation principles
The financial statements of German and foreign companies included in the scope
of consolidation are prepared using uniform accounting and valuation methods.
Capital consolidation takes place by offsetting the investments' carrying
amounts against the proportionate value of subsidiaries' equity that is revalued
at their time of acquisition. Assets and liabilities are recognised at fair
value. Remaining debt differentials are capitalised as goodwill and, according
to their future economic benefit, amortised over a period of up to 20 years,
with an effect on results. Generally, 10 to 15 years are taken as a basis.
Negative goodwill from first-time consolidations is also carried as an asset and
released in accordance with IAS 22.61 to 22.63. Within the scope of
deconsolidation, residual carrying amounts ascribed to both capitalised and
negative goodwill are taken into account when calculating income from disposals.
Expenses and income as well as receivables and payables between consolidated
companies are eliminated. Intra-group profits and losses are eliminated unless
they are of minor significance. As a general rule, the amortisation of
investments in consolidated enterprises disclosed in separate financial
statements is reversed.
The same consolidation principles apply to the investments in associates
accounted for using the equity method, whereby recognised goodwill is reported
on the Balance Sheet under investments and the amortisation is disclosed in the
results of investments, accordingly. Income from investments disclosed in the
results of investments also includes a corporate income tax imputation claim;
this relates to the proposed dividend payouts. Uniform accounting principles are
adopted for the financial statements of all principal enterprises accounted for
using the equity method.
Currency translation
In the enterprises' individual financial statements, foreign currency
transactions are stated at the exchange rate applicable at the time of first
entry. Exchange rate gains and losses from the assessment of monetary assets or
monetary liabilities in foreign currency occurring up to the balance-sheet date
are taken into account with an effect on the result.
Functional currency translation is applied when converting the currencies of
foreign companies' financial statements. In the Consolidated Financial
Statements, the balance-sheet items of all foreign companies are translated from
the respective country's currency into euros at the average exchange rate
prevailing on the balance-sheet date since principal foreign enterprises
included in the Consolidated Financial Statements conduct their business
independently in their national currency. When translating the adjusted equity
of foreign enterprises accounted for under the equity method, the same procedure
is followed. Differences to previous-year translations are netted out against
other comprehensive income (changes in equity that do not affect the operating
result) without an effect on profits or losses. Goodwill is translated at the
cut-off date as an asset of the commercially autonomous foreign sub-unit. Income
and expense items are translated at annual average exchange rates, and changes
to reserves at closing rates. Annual financial statements of Group companies
based in a country with hyper-inflation are translated according to IAS 29.
77
Accounting and valuation methods
Intangible assets are accounted for at acquisition or production cost, less
scheduled usage-induced depreciation. Software for commercial and technical
applications is amortised over three to five years using the straight-line
method; concessions and other usage rights generally have useful lives of up to
15 years. Goodwill from individual financial statements is capitalised and
amortised over its expected useful life using the straight-line method, as is
goodwill from capital consolidation. Negative differences from capital
consolidation are disclosed on the assets side as intangible assets.
Development expenditures are recognised as assets if a newly developed product
or process can be clearly defined, is technically feasible, and is intended to
be used by the enterprise itself or marketed. Furthermore, the asset recognition
requires that there be a sufficient level of certainty that the development
expenditures will be covered by the future inflow of funds. Capitalised
development costs are amortised on schedule over the time period during which
the products are expected to be sold. Research costs are recognised as an
expense.
Property, plant and equipment is stated at acquisition or production cost, less
scheduled depreciation through use. The cost of producing property, plant and
equipment comprises the full cost. The cost of raising outside capital is not
capitalised as part of the acquisition or production cost. Exploratory drillings
are disclosed according to the successful efforts method, i.e. as a rule, they
are capitalised only in the event of commercial success. As a rule, property,
plant and equipment as well as mining developments are depreciated using the
straight-line method unless another depreciation method is better suited to the
usage pattern.
Investment property (realty held as a financial investment) is stated at carried
acquisition or production cost. Marked-to-market valuation is done in accordance
with internationally accepted valuation policies.
The scheduled depreciation of assets we typically hold is calculated according
to the following useful lives, which apply throughout the Group:
Years
Buildings 12-80
Technical plant
Thermal power plants 15-20
Power grids 20-35
Water mains networks 20-100
Gas and water storage facilities 20-100
Refineries 6-20
Service stations 3-16
Waste management facilities 6-15
Mining facilities 4-20,25
Mechanical and electrical plant engineering equipment 4-15
Construction and civil engineering machinery 4-8
Mine developments 20-35
RWE-DEA Upstream drillings 8-15
Property, plant and equipment held under a finance lease is capitalised at the
lower of the lease payments' fair or present value and depreciated using the
straight-line method over its expected useful life or lease term - whichever is
the shorter.
Recoverability of the carrying value of intangible assets (including capitalised
development costs and goodwill) as well as property, plant and equipment is
regularly assessed. If the recoverable amount of an asset is less than its
carrying amount, an impairment loss is recognised. If the asset is part of a
unit that autonomously generates cash or cash equivalents, the depreciation is
calculated based on the usage value of the unit that generates cash or cash
equivalents. If the reason for an impairment loss recognised in prior years has
ceased to exist, a write-up is performed. Goodwill is written up only in
exceptional cases.
Special funds were fully consolidated for the first time in the year under
review.
78
Shares of associated companies accounted for at equity are accounted from
according to pro-rated equity plus goodwill.
Shares in non-consolidated affiliates, associated companies not accounted for at
equity and other shareholdings along with long-term securities disclosed as
financial assets are classified as available for sale without exception and are
stated at fair value. Unrealised gains and losses are stated as other
comprehensive income. Gains and losses stemming from the sale of such items are
stated with an effect on results. Write-downs are performed in the event of a
deterioration of creditworthiness.
Loans are stated at amortised cost. Loans with interest rates common on the
market are shown on the Balance Sheet at nominal value; interest-free and low
interest-bearing loans are discounted to their present value.
Inventories are carried at acquisition or production cost. Assessment is
generally based on average values, and the LIFO method is used for certain
inventories. The overburden of lignite mining is determined according to the
FIFO method. Production costs comprise full costs and are determined based on
the production facilities' normal capacity. When broken down, in addition to
directly allocable costs, production costs include adequate portions of required
materials and production overheads, including production-related depreciation
and retirement benefit expenses. The cost of raising outside capital is not
capitalised as part of the acquisition or production cost. Inventory risks
resulting from decreased usability are taken into account through appropriate
value deductions. Lower values on the cut-off date disclose stemming from
reduced net gains on disposals. If the net realisable value of inventories
written down in earlier periods has increased, the resulting reversal of the
write-down is recognised as a reduction of the cost of materials
Prepayments received from customers are carried as liabilities.
Nuclear fuel assemblies shown under inventories are stated at amortised cost.
Amortisation is energy-related according to consumption and capacity-related
according to the reactor's service life.
Long-term construction contracts are recognised under the percentage of
completion method. The capitalisable amount is disclosed under accounts
receivable and sales revenues. The stage of completion is determined through
measurements and according to the costs incurred (cost-to-cost method).
Anticipated contract losses are covered by valuation allowances or provisions
and are determined taking identifiable risks into account. Revenue from these
contracts is stated as contract revenue.
Accounts receivable and other assets are stated at acquisition cost after
deducting necessary valuation allowances which are oriented towards the actual
default risk. Under accounts receivable for supplies and services relating to
utility operations, prepayments received are netted against customer consumption
which is yet to be metered and billed.
Current securities are exclusively classified as available for sale and stated
at fair value. Further valuations are made following the rules applied to the
assessment of financial assets.
Provisions for pensions and similar obligations are calculated according to the
projected unit credit method. This benefit/years-of-service method does not only
take into account the retirement benefits and benefit entitlements known as of
the balance-sheet date, but also increases in salaries and retirement benefits
to be expected in the future. Actuarial gains and losses falling outside the
limits of a 10 per cent. range of total benefit obligations are distributed over
the average remaining length of service. The service cost is disclosed under
staff costs, and the interest portion of the transfer to provisions is shown
under financial results.
All other provisions take into account all obligations identifiable as of the
balance-sheet date which result from previous transactions or events whose
amount or due date is not certain. Provisions are carried at settlement values
and are not offset against positive profit contributions. The most probable
settlement value is used as a starting point. Provisions are only built when
based on legal or de-facto obligations to third parties.
79
All long-term provisions are recognised at the settlement value that is
discounted on the balance-sheet date. The settlement value also includes the
cost increases to be taken into account at the balance-sheet date. Excluded from
this are pension provisions for which special rules in accordance with IAS 19
apply.
Deferred taxes resulting from timing differences in the individual companies'
commercial and tax balance sheets and from consolidation procedures are valued
separately. Deferred tax assets also include tax reduction claims resulting from
the expected utilisation of existing loss carryforwards in subsequent years and
whose realisation is guaranteed with sufficient certainty. Deferred taxes are
assessed based on tax rates that are applicable or anticipated in the individual
countries at the time of realisation. The taxation rate used to calculate German
deferred taxes is 39.0 per cent. The Group's average local business tax rate has
been taken into account in addition to the 25 per cent. corporate tax rate and
the 5.5 per cent. solidarity surcharge.
Because IAS 12 (revised in 2000) was applied for the first time, deferred
corporate tax reductions and increases relating to future disbursements are not
considered until they actually arise. Claims and obligations recorded on the
Balance Sheet on 1 July 2001 are written back without affecting profits.
Otherwise, tax regulations valid or passed as of the balance-sheet date are
applied.
Liabilities are on principle valued at repayable amounts. Liabilities from
finance lease agreements are carried on the liabilities side in the amount of
the present value of the lease payments.
Home connection costs and construction subsidies of utility operations that are
carried on the liabilities side as deferred income are released in instalments
with an effect on results over a period of 20 years, dependent on the contract,
if necessary. Taxable subsidies and tax-free grants for fixed assets - which are
usually issued by the government - are disclosed as deferred income on the
Balance Sheet and appropriated as other operating income in line with the
assets' depreciation.
Derivative financial instruments are exclusively used for hedging purposes. Now
that IAS 39 has been applied for the first time, all derivative financial
instruments are accounted for as assets or liabilities. All derivative financial
instruments are stated at fair value regardless of their purpose.
Changes in the fair value of derivative financial instruments are disclosed in
the Income Statement in the event of a fair value hedge, as is the case with the
corresponding underlying transactions. This means that gains and losses from the
assessment of fair values of operating assets and liabilities included in the
Balance Sheet are disclosed as net sales or other expenses associated with the
underlying transaction, as are gains and losses from the assessment of fair
values of derivative financial instruments that are employed to hedge underlying
transactions included in the Balance Sheet. Gains and losses relating to hedges
of financial assets and liabilities are disclosed as part of the financial
result.
In the event of a cash flow hedge or a hedge of a net investment in a foreign
entity, the derivative financial instrument's unrealised gains and losses are
initially stated as part of other comprehensive income. Gains and losses are
disclosed in the Income Statement as soon as the hedged underlying transaction
has an effect on results. If the gain or loss from a hedge relates to the
acquisition of an asset, the gain or loss is considered when determining the
acquisition costs.
The ineffective part of a hedging relationship is disclosed with an effect on
results in the Income Statement.
Contingent liabilities are possible or present obligations that arise from past
events and for which an outflow of resources is not probable. They are not
recorded on the Balance Sheet. Obligation volumes specified for contingent
liabilities correspond to the extent of liability existing as of the
balance-sheet date.
80
Notes to the Income Statement
(1) Net sales
Net sales are recorded once the risk has been transferred to the customer.
This does not apply to contract revenue from the application of the
percentage of completion method for long-term construction contracts.
Mineral oil tax/natural gas tax/electricity tax paid by Group companies
directly is disclosed separately.
The segment reporting note contains a breakdown by business area and
geographical region. Of the EUR33,301 million in net sales (previous year:
EUR62,878 million), EUR6,106 million (previous year: EUR11,129 million) are
attributable to contract revenue from construction contracts, while
EUR1,125 million are attributable to the change in the scope of
consolidation.
(2) Other operating income
This item includes income from
o the release of EUR355 million in provisions (previous year: EUR1,497
million),
o the disposal of EUR111 million in fixed assets without financial
assets (previous year: EUR282 million),
o the disposal and write-back of EUR38 million in current assets without
securities (previous year: EUR78 million),
o derivative financial transactions of EUR697 million (previous
year:EUR171 million). Income is contrasted by corresponding expenses
incurred in connection with counteractive derivatives,
o EUR62 million in currency gains (previous year: EUR239 million).
Income from the disposal of financial assets is disclosed under results of
investments if it relates to investments; otherwise it is recorded as part
of other financial results, as is the income from the disposal of current
securities.
Currency gains are contrasted by currency losses that are disclosed under
other operating expenses.
The change in the scope of consolidation caused other operating income to
decline by EUR154 million.
(3) Result of investments
The results from investments in the six months ended 31 December 2001
included income from the disposal of investments of EUR327 million.
81
(4) Changes in Fixed Assets
Cost of acquisition or production
----------------------------------------------------------------
Additions/
disposals
Balance through
as of changes Currency
1 July in scope translation
2001 of cons. Additions Transfers adjustments
EUR million EUR million EUR million EUR million EUR million
Intangible Assets
Development costs 119 -- 22 -- 2
Concessions, patent rights and similar rights
and assets as well as licenses in such rights
and assets 1,667 76 126 6 (6)
Goodwill
- - from individual financial statements 220 (3) 25 -- o
- - from capital consolidation 8,237 169 71 -- (64)
Negative goodwill from capital consolidation (56) (3) -- -- --
Prepayments 11 -- 13 (1) --
-------- ------ ------ ---- ------
10,198 239 257 5 (68)
-------- ------ ------ ---- ------
Property, plant and equipment
Land, land rights and buildings including
buildings on third-party land 17,597 (1,151) 317 7 (186)
Investment property -- 1,136 95 -- (1)
Technical plant and machinery 60,009 273 757 426 (146)
Other equipment, factory and office equipment 5,676 222 254 37 (64)
Prepayment to other enterprises 562 -- 67 (73) o
Assets under construction 1,007 9 548 (405) (8)
-------- ------ ------ ---- ------
84,851 489 2,038 (8) (405)
-------- ------ ------ ---- ------
Financial Assets
Investment in affiliates 438 (514) 751 (3) 1
Loans to affiliates 40 o 13 -- --
Investments
- - in associated companies accounted for using
the equity method 5,163 159 595(1) -- (25)
- - other investments 989 321 104(2) 19 --
Loan to investees 292 -- 35 -- (1)
Long term securities 7,475 (6,733) 13(3) (1) (1)
Other loans 708 95 386 4 (6)
-------- ------ ------ ---- ------
15,105 (6,672) 1,897 19 (32)
-------- ------ ------ ---- ------
Total fixed assets 110,154 (5,944) 4,192 16 (505)
-------- ------ ------ ---- ------
Cost of
acquisition or production Accumulated depreciation/amortisation
----------------------------- -------------------------------------
Additions/
disposals
Balance Balance through Depreciation/
as of as of changes amortisation
31 December 1 July in scope in reporting
Disposals 2001 2001 of cons. period
EUR million EUR million EUR million EUR million EUR million
Intangible Assets
Development costs -- 143 18 1 14
Concessions, patent rights and similar rights
and assets as well as licenses in such rights
and assets 17 1,852 1,174 (2) 70
Goodwill
- - from individual financial statements 4 238 115 (2) 7
- - from capital consolidation 16 8,397 540 (3) 238
Negative goodwill from capital consolidation (55) (4) -- -- --
Prepayments o 23 -- -- 4
------- -------- ------- ------ -----
(18) 10,649 1,847 (6) 333
------- -------- ------- ------ -----
Property, plant and equipment
Land, land rights and buildings including
buildings on third-party land 171 16,413 6,609 (418) 295
Investment property 29 1,201 -- 388 47
Technical plant and machinery 329 60,990 42,231 7 879
Other equipment, factory and office equipment 199 5,926 4,251 (18) 281
Prepayment to other enterprises 6 550 1 -- --
Assets under construction 112 1,039 39 1 2
------- -------- ------- ------ -----
846 86,119 53,131 (40) 1,504
------- -------- ------- ------ -----
Financial Assets
Investment in affiliates 116 557 214 (2) 8
Loans to affiliates 2 51 10 -- --
Investments
- - in associated companies accounted for using
the equity method 1,046(1) 4,846 200 o 33
- - other investments 98(2) 1,335 18 1 15
Loan to investees 17 309 1 -- 2
Long term securities 84(3) 669 134 (84) 2
Other loans 82 1,105 10 (1) o
------- -------- ------- ------ -----
1,445 8,872 587 (86) 60
------- -------- ------- ------ -----
Total fixed assets 2,273 105,640 55,565 (132) 1,897
------- -------- ------- ------ -----
Accumulated depreciation/amortisation Carrying amounts
----------------------------------------------------------- -----------------------
Balance Balance Balance
Currency as of as of as of
translation 31 December 30 June 31 December
Transfers adjustment Disposals Writebacks 2001 2001 2001
EUR million EUR million EUR million EUR million EUR million EUR million EUR million
Intangible Assets
Development costs -- o -- -- 33 101 110
Concessions, patent rights and similar rights
and assets as well as licenses in such rights
and assets o (2) 13 2 1,225 493 627
Goodwill
- - from individual financial statements 220 -- -- 3 -- 117 105 121
- - from capital consolidation -- o 7 -- 768 7,697 7,629
Negative goodwill from capital consolidation -- -- -- -- -- (56) (4)
Prepayments -- -- -- -- 4 11 19
---- ---- --- ------ ------ ------- -------
o (2) 23 2 2,147 8,351 8,502
---- ---- --- ------ ------ ------- -------
Property, plant and equipment
Land, land rights and buildings including
buildings on third-party land 1 (54) 93 6 6,334 10,988 10,079
Investment property -- -- 16 -- 419 -- 782
Technical plant and machinery (12) (54) 318 2 42,731 17,778 18,259
Other equipment, factory and office equipment 12 (44) 200 -- 4,282 1,425 1,644
Prepayment to other enterprises -- -- -- -- 1 561 549
Assets under construction o -- o -- 42 968 997
---- ---- --- ------ ------ ------- -------
1 (152) 627 8 53,809 31,720 32,310
---- ---- --- ------ ------ ------- -------
Financial Assets
Investment in affiliates -- o 2 o 218 224 339
Loans to affiliates -- -- 1 -- 9 30 42
Investments
- - in associated companies accounted for using
the equity method -- -- 1 -- 232 4,963 4,614
- - other investments o -- o -- 34 971 1,301
Loan to investees -- -- o -- 3 291 306
Long term securities -- -- 1 48 3 7,341 666
Other loans -- -- 1 5 3 698 1,102
---- ---- --- ------ ------ ------- -------
o o 6 53 502 14,518 8,370
---- ---- --- ------ ------ ------- -------
Total fixed assets 1 (154) 656 63 56,458 54,589 49,182
---- ---- --- ------ ------ ------- -------
(1) EUR77 million of the additions and EUR283 million of the disposals result
from applying the equity method.
(2) EUR10 million of the additions and EUR8 million of the disposals result
from the marked-to-market valuation pursuant to IAS 39 which does not have
an effect on net income.
(3) EUR8 million of the additions and EUR2 million of the disposals result from
the marked-to-market valuation pursuant to IAS 39 which does not have an
effect on net income.
o Negligible amount.
82
(5) Provisions
30 June 2001 31 December 2001
EUR million EUR million
Provisions for pensions and similar obligations 13,646 13,915
Tax provisions 2,347 2,588
Provisions for nuclear waste management 11,389 11,518
less prepayments (879) (914)
-------- --------
10,510 10,604
Provisions for mining damage including reclamation 2,209 2,290
Other provisions 11,350 10,986
-------- --------
40,062 40,383
======== ========
Other provisions
Other provisions mainly include obligations arising from the personnel
sector in the amount of EUR2,865 million (previous year: EUR3,039 million),
restructuring commitments of EUR1,941 million (previous year: EUR2,777
million), purchase and sale obligations of EUR2,796 million (previous year:
EUR2,354 million) as well as contingent liabilities from the Electricity
Business Area of EUR659 million (previous year: EUR678 million) and from
RWE-DEA Downstream of EUR87 million (previous year: EUR87 million).
(6) Liabilities
Thereof 31 Thereof
30 June RT(1)=1 RT(1)>5 December RT(1)=1 RT(1)>5
2001 year years 2001 year years
EUR EUR EUR EUR EUR EUR
million million million million million million
Loans 3,579 40 3,116 5,619 800 3,805
Loans against borrowers'
notes 3,451 1,689 1,209 1,784 83 1,631
Accounts payable to banks 6,962 3,266 2,164 8,393 4,315 1,991
Accounts payable for supplies
and services 5,850 5,372 -- 5,700 5,396 1
Prepayments received 406 361 -- 427 372 --
Accounts payable for bills
accepted and drawn 15 15 -- 19 19 --
Accounts payable to affiliates 347 331 1 437 403 --
Accounts payable to investees 1,569 1,566 -- 1,270 1,199 --
Other liabilities 5,632(2) 4,357 293 6,886(2) 5,103 242
of which tax (1,331) (1,331) -- (598) (598) --
of which under social security (666) (330) (114) (740) (332) (89)
-------- -------- -------- -------- -------- --------
27,811 16,997 6,783 30,535 17,690 7,670
-------- -------- -------- -------- -------- --------
(1) RT = Remaining Term.
(2) EUR1,204 million of which relate to commercial papers (previous year:
EUR425 million).
EUR11,410 million (previous year: EUR9,114 million) of the long-term
liabilities were interest-bearing. The average interest burden of accounts
payable to banks in the reporting period was 5.6 per cent. (previous year:
6.4 per cent.).
In 2001, we placed a total of EUR4.2 billion in bonds. Most of the bonds
were issued by the Dutch firm RWE Finance B.V. with warranties provided by
RWEAG. In the reporting period, RWE AG issued (pound)100 million and US$75
million in bonds. Bonds issued by RWEFinance B.V. in the year under review
were raised by EUR150 million and (pound)225 million, respectively.
83
(7) Earnings per share
Basic earnings per share are calculated by dividing the net profit
attributable to the shares by the average number of shares. The figure may
become diluted by so-called potential shares (above all stock options and
convertible bonds). The options under RWE's stock option scheme do not have
a dilutive effect on profits. Basic earnings per share and diluted earnings
per share are thus equivalent. The same earnings per share are attributable
to common and preferred shares.
For an improved assessment of the earnings situation, an earnings per share
figure adjusted for goodwill amortisation has been provided. Goodwill
amortisation of EUR0.43 per share (previous year:EUR0.66 per share) was
added to earnings per share.
Six months
Year ended Year ended ended 31
30 June 30 June December
2000 2001 2001
Net profit EUR million 1,212 1,264 621
Number of shares outstanding
(weighted average) in thousands 541,545 564,572 562,363
Earnings per share EUR 2.24 2.24 1.10
Earnings per share adjusted for
goodwill amortisation EUR 2.62 2.90 1.53
Dividend per share for the 1998/99 financial year EUR 1.00 -- --
Dividend per share for RWEAG's
2000 truncated fiscal year* EUR -- 1.00 --
Proposed dividend per share for RWEAG's
2001 financial year EUR -- -- 1.00
*For RWE AG's 2000 truncated fiscal year, the dividend for Type B common
shares was EUR1.38.
(8) Segment reporting
In the RWE Group, segments are distinguished on the basis of the services
provided by the Group's business areas. The segmentation of business areas
and geographical regions is based on the internal reporting system.
The core business area Electricity comprises the entire value creation
chain, from power generation and the grid to sales and trading. The core
business area Electricity also includes the activities of RWE Solutions and
RWE Systems and will also include the Harpen Group, which specialises in
regenerative and decentralised power generation, from 1 January 2002
onwards.
The core business area Gas comprises the midstream and downstream gas
operations of RWE Gas as well as RWE-DEA's upstream business.
The core business area Water controls the Group's full range of water
operations via Thames Water Plc.
The core business area Environmental Services is headed up by RWE Umwelt AG
and provides a wide range of services in the field of waste management.
RWE-DEA Downstream is a non-core financial holding that is managed by DEA
Mineraloel GmbH, a wholly-owned subsidiary of RWE-DEA AG.
The RWE Group owns a 56.16 per cent. stake in the non-core financial
holding Heidelberger Druckmaschinen.
The RWE Group's interest in the non-core financial holding HOCHTIEF amounts
to 62.38 per cent.
Consolidation effects, the holding company and other activities not
allocable to the business areas presented separately are disclosed under
"Other/Holding/Consolidation." The Corporate Services Division will be
transferred out of the Electricity Business Area and stated under this item
from 1 January 2002 onwards.
84
Segment reporting
Core business
---------------------------------------------------------------------------------------------------------
Electricity Gas Water Environment Services
2000/01 2001 TFY 2000/01 2001 TFY 2000/01 2001 TFY 2000/01 2001 TFY
EUR million EUR million EUR million EUR million EUR million EUR million EUR million EUR million
External net sales 19,748 10,904 3,603 1,647 1,690 1,394 2,045 1,068
Internal net sales 2,396 1,959 729 351 -- -- 24 22
------- ------- ------- ------- ------- ------- ------- -------
Total net sales 22,144 12,863 4,332 1,998 1,690 1,394 2,069 1,090
Operating result 1,730 960 732 258 563 415 135 89
Result from investments in
equity companies 172 11 50 (8) (5) (14) 10 2
Scheduled depreciation and
amortisation 1,781 789 346 154 398 352 205 101
Other major non-cash expenses 3,724 1,982 184 131 301 179 279 170
EBITDA 3,254 1,732 868 395 821 670 309 176
Operating assets (as per the
value management concept) 15,837 15,833 3,252 3,251 12,856 12,784 1,348 1,396
Gross assets (as per the
balance sheet) 45,936 48,361 6,309 6,327 18,281 18,328 2,261 2,444
Gross debt (as per the
balance sheet) 40,161 42,205 3,607 3,647 10,702 11,012 1,929 2,134
Carrying values of shares
held in equity companies 1,792 2,285 564 541 320 231 93 107
Capital expenditure on
intangible assets and
property, plant and
equipment 1,652 911 332 198 508 451 209 130
------- ------- ------- ------- ------- ------- ------- -------
Non-core business
------------------------------------------------------------------------------
RWE-DEA Downstream Heidelberger Druckmaschinen HOCHTIEF
2000/01 2001 TFY 2000/01 2001 TFY 2000/01 2001 TFY
EUR million EUR million EUR million EUR million EUR million EUR million
External net sales 17,259 8,414 5,303 3,573 11,027 6,176
Internal net sales 293 24 -- -- 28 8
------- ------- ------- ------- ------- -------
Total net sales 17,552 8,438 5,303 3,573 11,055 6,184
Operating result 429 202 510 146 97 122
Result from investments in
equity companies 13 8 (10) (23) 79 9
Scheduled depreciation and
amortisation 146 73 222 159 187 130
Other major non-cash expenses 133 127 543 358 405 276
EBITDA 558 271 711 306 165 237
Operating assets (as per the
value management concept) 807 1,030 2,906 3,180 1,288 1,140
Gross assets (as per the
balance sheet) 3,142 2,792 5,779 6,082 7,333 7,883
Gross debt (as per the
balance sheet) 2,723 2,250 3,069 3,475 5,447 5,830
Carrying values of shares
held in equity companies 152 158 149 189 638 719
Capital expenditure on
intangible assets and
property, plant and
equipment 132 55 237 162 281 300
------- ------- ------- ------- ------- -------
Other/Holding/Consolidation Group
2000/01 2001 TFY 2000/01 2001 TFY
EUR million EUR million EUR million EUR million
External net sales 2,203 125 62,878 33,301
Internal net sales 10 4 3,480 2,368
------- ------- ------- -------
Total net sales 2,213 129 66,358 35,669
Operating result (243) (163) 3,953 2,029
Result from investments in
equity companies 258 (8) 567 (23)
Scheduled depreciation and
amortisation 46 21 3,331 1,779
Other major non-cash expenses 1,454 830 7,023 4,053
EBITDA (111) (150) 6,575 3,637
Operating assets (as per the
value management concept) (537) (754) 37,757 37,860
Gross assets (as per the
balance sheet) (1,615) (768) 87,426 91,449
Gross debt (as per the
balance sheet) 8,945 9,767 76,583 80,320
Carrying values of shares
held in equity companies 1,255 384 4,963 4,614
Capital expenditure on
intangible assets and
property, plant and
equipment 167 88 3,518 2,295
------- ------- ------- -------
Germany Rest of Europe Americas
2000/01 2001 TFY 2000/01 2001 TFY 2000/01 2001 TFY
EUR million EUR million EUR million EUR million EUR million EUR million
External net sales 39,070 19,381 8,095 5,224 12,247 6,067
Gross assets (as per the balance sheet) 53,130 54,418 20,220 20,717 11,157 13,222
Capital expenditure on intangible assets
and property, plant and equipment 2,084 1,215 769 649 497 301
------ ------ ------ ------ ------ ------
Asia Australia Africa
2000/01 2001 TFY 2000/01 2001 TFY 2000/01 2001 TFY
EUR million EUR million EUR million EUR million EUR million EUR million
External net sales 2,198 1,379 1,010 1,058 258 192
Gross assets (as per the balance sheet) 1,633 1,781 1,260 1,272 26 39
Capital expenditure on intangible assets
and property, plant and equipment 30 6 137 124 1 --
------ ------ ------ ------ ------ ------
Total
2000/01 2001 TFY
EUR million EUR million
External net sales 62,878 33,301
Gross assets (as per the balance sheet) 87,426 91,449
Capital expenditure on intangible assets
and property, plant and equipment 3,518 2,295
------ ------
TFY = Truncated Financial Year
85
Notes on segment data
o Internal sales reflect the level of sales between Group enterprises. They
are invoiced under the same conditions as for third parties. Total net
sales by business area are the sum of total external and internal net
sales.
o Depreciation and amortisation concern fixed assets, without securities or
other loans.
o The delimitation of operating assets is derived from the value management
concept. These figures are compatible with the operating result, which is
also used for control purposes within the Group. In addition to operating
assets, the balance sheet items' consolidated values for gross assets and
liabilities are also disclosed for core business areas and non-core
businesses.
o Capital expenditure covers intangible assets and property, plant and
equipment.
o Results from investments in equity companies cover earnings and expenses
from profit and loss transfer agreements, investments and goodwill
amortisation.
Consolidated operating results
Year ended Six months ended
30 June 2001 31 December 2001
EUR million EUR million
Results from operating activities 3,161 1,752
+ Result from investments 638 312
- Non-operating result 112 (52)
+ Interest credit on prepayments received 42 17
-------- --------
Operating result 3,953 2,029
-------- --------
The reconciliation addresses the following points:
o The result from investments includes all costs and income that have arisen
in connection with operating investments. Therefore, the result from
investments constitutes an integral part of the Group's operating activity.
o Income and costs that are unusual from an economic perspective, or are the
result of exceptional events, prejudice the assessment of operating
activities. They are reclassified as part of the non-operating result,
which is a separate part of the value management concept. Furthermore, the
non-operating result contains goodwill amortisation from capital
consolidation. The non-operating result also contains the release of
negative goodwill.
o Prepayments received for long-term production contracts at the RWEGroup's
financial investment HOCHTIEF are not to be assigned to financing
activities from a commercial perspective, but are instead induced by
operations. HOCHTIEF's operating result has therefore been adjusted by way
of an interest credit on received prepayments.
In the truncated financial year under review, the consolidated profit from
operating activities and the results from investments were adjusted by the
non-operating result of EUR52 million (previous year: EUR(112) million).
Goodwill amortisation from capital consolidation shown in the non-operating
result in line with international practice amounted to EUR238 million (previous
year: EUR374 million).
Capital gains in the truncated fiscal year under review amounted to EUR401
million and principally relate to the divestment of LAUBAG. In the previous
year, the sale of the chemicals unit, MAQUET and of real estate not required for
operations led to proceeds of EUR364 million.
86
Events occurring after the balance sheet date
Deconsolidation of non-core construction business
Effective 1 January 2002 RWE stopped including HOCHTIEF AG in the consolidated
financial statement as fully consolidated and now accounts for the operation at
equity. Within RWE's multi-utility strategy, construction is part of non-core
business. RWE views this as a first step in its previously announced medium-term
divestment of the largest German construction company as part of its focus on
its core business in the fields of energy and environment. RWE AG holds 62.38
per cent. of HOCHTIEF's shares, of which 45.71 per cent. were owned directly
prior to deconsolidation. Francommerz, a holding company in which RWE had a 60
per cent. share, held the remaining 16.67 per cent. indirectly. Other indirect
shareholders include Allianz, Commerzbank and Munchner Ruck. RWE AG reduced its
direct share to less than 40 per cent. and also transferred the majority of
Francommerz. As a result, the prerequisites for full consolidation are no longer
met.
Expanding gas production
RWE-DEA took over the British gas producer Highland Energy effective 5 February
2002. This acquisition represents an important base for RWE from which to
establish and expand a promising upstream position in the British North Sea.
With Highland Energy, RWE-DEA has expanded its current gas reserves by 13
million to 76.54 million cubic metres of oil equivalents. For market access, RWE
can rely upon existing network connections to the United Kingdom and Continental
Europe.
Harpen sharpens focus
After selling the Toman Group, including IMO Deutschland, a car wash operator,
Harpen also sold its logistics business, Harpen Transport AG, in January 2002.
Approvals from regional and supervisory agencies are pending. The Harpen
subsidiary, which is mainly involved in transport on inland waterways, achieved
sales of EUR73 million in the 2001 calendar fiscal year.
Conclusion of the STEAG/Harpen transaction
At the start of 2002 RWE sold its shares totalling 14.8 per cent. in STEAG to
RAG. This was preceded by the purchase of RAG's 23.47 per cent. share of Harpen
in December 2001. As a consequence of this transaction, RWE now enjoys a purely
customer-supplier relationship with STEAG.
First-time consolidation of Thyssengas
RWE will be fully consolidating its 75 per cent. stake in Thyssengas in the
Group's financial statements as from the beginning of the 2002 fiscal year. This
has been made possible by the consent of Shell, which owns 25 per cent. of the
stock. Thyssengas is one of Germany's biggest long-distance gas companies, and
in the 2001 fiscal year achieved sales of approximately EUR1.4 billion.
RWE Gas establishes logistics joint venture
In January 2002 RWE Gas and the London-based Lattice Group agreed to establish a
joint natural gas logistics company. Operating under the name of "Viavera" the
company will provide services to natural gas traders and sales companies in
particular. Logistics management covering everything from negotiations with
network operators to the complete monitoring of transport agreements will form
the heart of its activities. RWE Gas will hold 60 per cent. of the shares in the
joint venture.
RWE Gas parts with EMB
RWE Gas sold its 45 per cent. share of EMB Erdgas Mark Brandenburg effective 1
January 2002. RWEwas required to sell the regional utility company based on
conditions imposed by the German antitrust authority as part of the RWE-VEW
merger. EMB achieved sales of EUR245 million in 2001.
HOCHTIEF reduces non-core activities
With the sale of its interest in MONACHIA Grundstucks-AG, HOCHTIEF has parted
with yet another non-core activity, following the sale of its software business
in July 2001.
87
APPENDIX V
Additional Information
1 Responsibility
(a) The Directors of the Offeror, whose details are set out in paragraph 2(c)
below, and the members of the RWE Management Board, whose details are set
out in paragraph 2(a) below, accept responsibility for the information
contained in this document, other than that relating to the Innogy Group,
the Directors of Innogy and their immediate families. To the best of the
knowledge and belief of the Directors of the Offeror and the members of the
RWE Management Board (who have taken all reasonable care to ensure that
such is the case), such information is in accordance with the facts and
does not omit anything likely to affect the import of such information.
(b) The Directors of Innogy, whose names are set out in paragraph 2(d) below,
accept responsibility for the information contained in this document
relating to the Innogy Group, the Directors of Innogy and their immediate
families. To the best of the knowledge and belief of the Directors of
Innogy (who have taken all reasonable care to ensure that such is the
case), such information is in accordance with the facts and does not omit
anything likely to affect the import of such information.
2 Directors
(a) Members of the RWE Management Board
RWE's business is managed by a Board currently consisting of six members.
Under German law, the Management Board has management responsibility for
RWE and broad authority to take actions in the name of RWE, subject to the
authority expressly reserved by the German Stock Corporation Law and by
RWE's articles of association to the shareholders or the Supervisory Board.
The following list sets forth the (i) name and (ii) citizenship of the
members of RWE's Management Board. In each case, the present principal
occupation or employment and the name, principal business and the address
of the corporation or other organisation in which such employment is
conducted is: Member of the Management Board, RWE Aktiengesellschaft,
Opernplatz 1, D-45128 Essen, Germany. The list also provides the employment
history of each individual for the past five years.
(i) Dr. Dietmar Kuhnt
Dr. Kuhnt's country of citizenship is Germany. Dr. Kuhnt has served as
RWE's Chief Executive Officer since 1995.
(ii) Dr. Richard R. Klein Dr. Klein's country of citizenship is Germany.
Dr. Klein has served as a Member of RWE's Management Board since 1996.
From 1996 to 1999 he also served as the Chief Executive Officer of RWE
Umwelt Aktiengesellschaft.
(iii) Dr. Gert Maichel
Dr. Maichel's country of citizenship is Germany. Dr. Maichel has
served as a Member of RWE's Management Board since 2000. Between 1999
and 2000, he was Chief Executive Officer of VEW Aktiengesellschaft.
From 1998 to 1999, he served as Department Director of BASF
Aktiengesellschaft. He also worked at WINGAS GmbH from 1993 to 1998.
(iv) Manfred Remmel
Mr. Remmel's country of citizenship is Germany. Mr. Remmel has served
as a Member of RWE's Management Board since 1999. Between 2000 and
2001, he was the Chief Executive Officer of RWE Plus
Aktiengesellschaft. From 1999 to 2000 he served as the Chief Executive
Officer of RWE Energie Aktiengesellschaft. Between 1997 and 1998 he
served as a Member of the Management Board of DaimlerChrysler
Aktiengesellschaft.
88
(v) Dr. Klaus Sturany
Dr. Sturany's country of citizenship is Austria. Dr. Sturany has
served as a Member of RWE's Management Board since 1999. Between 1996
and 1999, he served as a Member of the Management Board of GEA
Aktiengesellschaft.
(vi) Jan Zilius
Mr. Zilius's country of citizenship is Germany. Mr. Zilius has served
as a Member of RWE's Management Board since 1998. Between 1990 and
1998, he served as a Member of the Management Board of RWE Rheinbraun
Aktiengesellschaft.
The principal executive offices of RWE are at Opernplatz 1, D-45128 Essen,
Germany and the telephone number is +49 201 12 00.
(b) Members of the RWE Supervisory Board
The Supervisory Board of RWE supervises the management of RWE by the
Management Board and has the responsibility of making all ongoing checks
and inspections that it deems appropriate and of reviewing such documents
as it deems necessary or appropriate for the performance of its duties. The
following list sets forth the (i) name, (ii) business address, (iii)
citizenship, (iv) present principal occupation or employment, and (v) the
employment history for the past five years of each member of RWE's
Supervisory Board.
(i) Dr. h.c. Friedel Neuber
Westdeutsche Landesbank Girozentrale, Herzogstrasse 15, 40217
Dusseldorf, Germany
Dr. Neuber's country of citizenship is Germany. Dr. Neuber is the
former President and Chief Executive Officer of Westdeutsche
Landesbank Girozentrale.
(ii) Dr. Paul Achleitner
Allianz Aktiengesellschaft, Koniginstrasse 28, 80802 Munchen, Germany
Dr. Achleitner's country of citizenship is Austria. Dr. Achleitner
serves as the Executive Vice President of Allianz Aktiengesellschaft.
Between 1994 and 2000, he served as Chairman of the Board of
Management of Goldman Sachs & Co. OHG.
(iii) Carl-Ludwig von Boehm-Bezing
Deutsche Bank Aktiengesellschaft, Taunusanlage 12, 60325 Frankfurt am
Main, Germany
Mr. von Boehm-Bezing's country of citizenship is Germany. Mr. von
Boehm-Bezing is the former Executive Vice President and member of the
management board of Deutsche Bank Aktiengesellschaft.
(iv) Frank Bsirske
ver.di Vereinte Dienstleistungsgewerkschaft e. V., Potsdamer Platz 10,
10785 Berlin, Germany
Mr. Bsirske's country of citizenship is Germany. Mr. Bsirske serves as
the Chairman of ver.di Vereinte Dienstleistungsgewerkschaft e.V.
Between 1997 and 2000, he served as Stadtrat in the Personnel and
Organisational Department of the City of Hannover.
(v) Burkhard Drescher
Stadt Oberhausen, Schwarzstrasse 72, 46042 Oberhausen, Germany
Mr. Drescher's country of citizenship is Germany. Mr. Drescher serves
as Lord Mayor of the City of Oberhausen. Between 1991 and 1997, he
served as Oberstadtdirektor of the City of Oberhausen.
89
(vi) Dipl. Ing. Wilfried Eickenberg RWE-Plus Aktiengesellschaft, Neue
Julicher Strasse 60, 52353 Duren, Germany
Mr. Eickenberg's country of citizenship is Germany. Mr. Eickenberg is
head of the general works council of RWE Plus Aktiengesellschaft.
Prior to this, Mr. Eickenberg served as head of the works council of
RWE Energie Aktiengesellschaft from 1996 to 2000.
(vii) Ralf Hiltenkamp
Edelhoff Umwelt Services GmbH & Co. KG, Hegestuck 20, 58640 Iserlohn,
Germany
Mr. Hiltenkamp's country of citizenship is Germany. Mr. Hiltenkamp is
a machine fitter at Edelhoff Umwelt Services GmbH & Co. KG.
(viii) Heinz-Eberhard Holl
Landkreis Osnabruck, Am Scholerberg 1, 49082 Osnabruck, Germany
Mr. Holl's country of citizenship is Germany. Mr. Holl is the Chief
Administrative Officer of the Landkreis Osnabruck where he has served
since 1990.
(ix) Berthold Huber
IG Metall, Bezirk Baden-Wurttemberg, Holzelweg 2, 70191 Stuttgart,
Germany
Mr. Huber's country of citizenship is Germany. Mr. Huber is the head
of the Baden-Wurttemberg district of IG Metall Trade Union. Between
1993 and 1998, Mr. Huber served as Coordinating Department Manager of
Vorstandsbereich, IG Metall.
(x) Berthold Krell
RWE Net Aktiengesellschaft, Netzregion Sud, Friedrichstrasse 60, 57072
Siegen, Germany
Mr. Krell's country of citizenship is Germany. Mr. Krell is a chief
fitter at RWE Net Aktiengesellschaft. Prior to this, Mr. Krell served
as head of the works council of Netzregion Siegen between 1989 and
2000.
(xi) Dr. Gerhard Langemeyer
Stadt Dortmund, Friedensplatz 1, 44135 Dortmund, Germany
Dr. Langemeyer's country of citizenship is Germany. Dr. Langemeyer is
the Lord Mayor of the City of Dortmund. Prior to this, Dr. Langemeyer
served as Comptroller for Stadt Dortmund between 1995 and 1998.
(xii) Josef Pitz
Heidelberger Druckmaschinen Aktiengesellschaft, Kurfursten-Anlage
52-60, 69115 Heidelberg, Germany
Mr. Pitz's country of citizenship is Germany. Mr. Pitz is Head of the
general works council of Heidelberger Druckmaschinen
Aktiengesellschaft.
(xiii) Dr. Wolfgang Reiniger
Stadt Essen, Rathaus, 45121 Essen, Germany
Dr. Reiniger's country of citizenship is Germany. Dr. Reiniger is the
Lord Mayor of the City of Essen. Prior to this, he served as a Member
of the City Council of Essen from 1994 to 1999.
(xiv) Gunter Reppien
RWE Power Aktiengesellschaft, Kraftwerke Lingen, Am Hilgenberg, 49811
Lingen, Germany
91
Mr. Reppien's country of citizenship is Germany. Mr. Reppien has
served as chief fitter at RWE Power Aktiengesellschaft since 2000.
Prior to this, he served as Head of the works council of Kraftwerke
Lingen since 1994.
(xv) Bernhard von Rothkirch
RWE Rheinbraun Aktiengesellschaft, Tagebau Inden, Durwisserstrasse,
52249 Eschweiler, Germany
Mr. von Rothkirch's country of citizenship is Germany. Mr. von
Rothkirch is a chief engineer at RWE Rheinbraun Aktiengesellschaft.
(xvi) Dr. Manfred Schneider
Bayer Aktiengesellschaft, 51368 Leverkusen, Germany
Dr. Schneider's country of citizenship is Germany. Dr. Schneider is
the President and CEO of Bayer Aktiengesellschaft.
(xvii) Klaus-Dieter Sudhofer
IG Bergbau, Chemie, Energie, Konigsworther Platz 6, 30167 Hannover,
Germany
Mr. Sudhofer's country of citizenship is Germany. Mr. Sudhofer has
served as the Trade Union Secretary Deputy Chairman, IG Bergbau,
Chemie, Energie Trade Union since 1997. Prior to this, Mr. Sudhofer
served as Second Chairman of the IG Bergbau, Chemie, Energie Trade
Union from 1990 to 1997.
(xviii) Dr. Alfons Friedrich Titzrath
Dresdner Bank Aktiengesellschaft, Konigsallee 37, 40212 Dusseldorf,
Germany
Dr. Titzrath's country of citizenship is Germany. Dr. Titzrath has
served as a Member of the Supervisory Board of Dresdner Bank
Aktiengesellschaft since 2001. Prior to this, Dr. Titzrath served as
Chairman of the Supervisory Board, Dresdner Bank Aktiengesellschaft
from 1997 to 2001.
(xix) Prof. Karel Van Miert
University Nyenrode, Straatweg 25, 3621 BG Breukelen, Netherlands
Prof. Van Miert's country of citizenship is Belgium. Prof. Van Miert
is the President of the University Nyenrode. Between 1989 and 1999, he
served as a Member of the EU-Commission.
(xx) Erwin Winkel
Tagebau Hambach, Heideweg, 52382 Niederzier, Germany
Mr. Winkel's country of citizenship is Germany. Mr. Winkel is a power
systems electronics engineer at Tagebau Hambach.
(c) Directors of the Offeror
The Offeror is a German company with limited liability. As such, the
Offeror's business is managed by two Directors who are functionally
equivalent to the directors of a company. The Offeror's Directors are Dr.
Klein and Dr. Sturany, both of whom are members of the RWE Management
Board. The relevant information for Dr. Klein can be found in paragraph
2(a)(ii) of this Appendix. The relevant information for Dr. Sturany can be
found in paragraph 2(a)(v) of this Appendix.
The principal executive offices of the Offeror are at Opernplatz 1, D-45128
Essen, Germany, and the telephone number is +49 201 12 00.
(d) Directors of Innogy
The Directors of Innogy are Brian Count, Mike Bowden, Andrew Duff, Steve
Fletcher, Tim Weller, Ross Sayers, Yvonne Constance, Richard Delbridge, Sir
Brandon Gough and Sir Robin Mountfield.
The registered office and head office of Innogy is Windmill Hill Business
Park, Whitehill Way, Swindon, Wiltshire SN5 6PB.
3 Market Quotations
Set out below are the Closing Prices for Innogy Shares and Innogy ADSs on:
(a) the first business day or US business day, respectively, of each of the six
months immediately before the date of this document;
(b) 15 February 2002 (being the last business day and the last US business day
prior to the commencement of the Offer Period); and
(c) 26 March 2002 (being the latest practicable date prior to the posting of
this document).
Innogy Shares Innogy ADSs
Date (pence) (US$)
---- ------- -----
1 October 2001 209.50 30.60
1 November 2001 209.00 30.30
3 December 2001 196.50 27.60
2 January 2002 197.00 28.15
1 February 2002 200.00 No trades
15 February 2002 210.25 29.55
1 March 2002 260.50 36.70
26 March 2002 270.25 38.55
Innogy Shares are listed on the Official List of the UK Listing Authority
and traded on the London Stock Exchange. Innogy ADSs are listed and traded
on the New York Stock Exchange. The following table sets out, for the
periods indicated, the high and low Closing Prices for Innogy Shares and
Innogy ADSs.
Innogy Shares Innogy ADSs
(pence) (pence) (US$) (US$)
Low High Low High
Calendar Year 2000
First Quarter -- -- -- --
Second Quarter -- -- -- --
Third Quarter -- -- -- --
Fourth Quarter 165.25 219.50 22.50 30.50
Calendar Year 2001
First Quarter 181.50 216.00 25.05 31.11
Second Quarter 196.00 229.00 27.50 32.00
Third Quarter 193.50 237.00 27.50 34.05
Fourth Quarter 190.00 213.50 27.01 31.10
As of 26 March 2002 (being the latest practicable date prior to the posting
of this document), 1,183,408,501 Innogy Shares were issued and outstanding,
of which 44,291,520 are represented by Innogy ADSs.
92
4 Shareholdings and dealings
For the purposes of this paragraph 4:
"arrangement" includes indemnity or option arrangements, and any agreement or
understanding, formal or informal, of whatever nature, relating to relevant
securities of Innogy or the Offeror which may be an inducement to deal or
refrain from dealing;
"associate" means, in relation to Innogy, any member of the Innogy Group and any
associated company of any member of the Innogy Group, their financial and other
professional advisers, their directors and such directors' immediate families
and their pension funds;
"derivative" includes any financial product whose value in whole or in part is
determined directly or indirectly by reference to the price of an underlying
security but which does not include the possibility of delivery of such
underlying securities;
"disclosure period" means the period commencing on 17 February 2001 (the date 12
months prior to the commencement of the Offer Period) and ending on 26 March
2002 (the latest practicable date prior to the publication of this document);
and
"relevant securities" means Innogy Securities or any securities convertible
into, rights to subscribe for, options (including traded options) in respect of,
or derivatives referenced to, Innogy Securities.
(a) Shares of the Offeror and RWE
Neither Innogy nor any of its directors nor their immediate families, owns
or is interested, directly or indirectly, in any shares of the Offeror or
RWE or any securities convertible into, rights to subscribe for, or options
(including traded options) in respect of such shares, nor has any such
person dealt for value therein during the disclosure period.
(b) Innogy Shares and Innogy ADSs
(i) As at 26 March 2002 (being the latest practicable date prior to the
publication of this document), the interests of the Directors of
Innogy in Innogy Shares, which had been notified to Innogy pursuant to
section 324 or 328 of the Companies Act and which are required to be
entered in the register maintained under section 325 of the Companies
Act and the interests of all persons connected (within the meaning of
section 346 of the Companies Act) with the Directors of Innogy which
would, if the connected person were a Director of Innogy, be required
to be disclosed in accordance with the foregoing sections, and the
existence of which is known or could with reasonable diligence become
known by the relevant Director of Innogy, all of which are beneficial
unless otherwise stated, were as follows:
Number of Innogy
Shares*
Mike Bowden 5,765
Yvonne Constance 16,928
Dr. Brian Count 87,712
Richard Delbridge 30,000
Andrew Duff 4,669
Steve Fletcher 4,548
Sir Brandon Gough 2,075
Sir Robin Mountfield 3,550
Ross Sayers 67,815
Tim Weller --
*In addition, all the directors are technically interested in
1,857,705 Innogy Shares held in the Innogy Holdings Employee Share
Trust, which are to be used to satisfy awards made under the Innogy
Long Term Incentive Plan.
93
The following Directors of Innogy hold options to subscribe for Innogy
Shares under the Innogy Share Incentive Plans:
Exercise
price per
Options in Innogy Date
respect of Share Date when
Director Scheme Innogy Shares (pence) granted exercisable
Mike Bowden Innogy Executive 24,106 174.36 13.12.95* 1998-2005
Share Option Plan 26,963 184.09 23.12.96* 1999-2006
25,290 219.90 02.12.97* 2000-2007
31,577 200.83 01.12.98* 2001-2008
Innogy Sharesave Plans 7,386 140.12 31.12.96* 2002
2,913 133.00 31.10.00 2003
6,284 158.00 28.12.01 2007
Dr. Brian Count Innogy Executive Share 36,359 191.49 30.11.94* 1997-2004
Option Plan 65,030 174.36 13.12.95* 1998-2005
152,058 184.09 23.12.96* 1999-2006
66,728 219.90 02.12.97* 2000-2007
75,723 200.83 01.12.98* 2001-2008
Innogy Sharesave Plans 5,075 133.00 31.10.00 2005
6,284 158.00 28.12.01 2007
Andrew Duff Innogy Executive Share 45,074 221.85 01.06.98* 2001-2008
Option Plan 39,211 200.83 01.12.98* 2001-2008
Innogy Sharesave Plans 12,687 133.00 31.10.00 2005
Steve Fletcher Innogy Executive Share 22,598 174.36 13.12.95* 1998-2005
Option Plan 27,243 184.09 23.12.96* 1999-2006
27,176 219.90 02.12.97* 2000-2007
35,290 200.83 01.12.98* 2001-2008
Innogy Sharesave Plans 7,283 133.00 31.10.00 2003
Ross Sayers Innogy Sharesave Plans 7,283 133.00 31.10.00 2003
* The date of grant stated is the assumed date of grant. These
options were actually granted in October 2000 and relate to
options previously held over National Power PLC shares which were
cancelled in consideration for the grants listed above. In
respect of options granted under the Innogy Sharesave Plans,
those options with an asterisk placed next to them were granted
under the Innogy Holdings Unapproved SAYE Plan. All other
sharesave options listed were granted under the Innogy Holdings
Sharesave Plan.
The following Directors of Innogy hold conditional awards of Innogy
Shares under the Innogy Long Term Incentive Plan ("LTIP") Number of
Director Date of conditional award Innogy Shares
Mike Bowden 3 October 2000 84,337
25 June 2001 82,125
Dr. Brian Count 3 October 2000 174,698
25 June 2001 169,082
Andrew Duff 3 October 2000 111,445
25 June 2001 115,942
Steve Fletcher 3 October 2000 111,445
25 June 2001 115,942
Ross Sayers 3 October 2000 271,084
25 June 2001 113,526
Tim Weller 7 January 2002 59,588
(ii) The Directors of Innogy have given irrevocable undertakings to accept
the Offer in respect of Innogy Shares held by them.
94
(iii)Save as disclosed below, none of the subsidiaries of Innogy, pension
funds of Innogy or of a subsidiary of Innogy, financial and other
professional advisers to Innogy (other than exempt market makers), nor
any persons with whom Innogy or any person who is an associate of
Innogy has an arrangement, or whose investments are managed on a
discretionary basis by fund managers (other than exempt fund managers)
connected with Innogy, owned or controlled any relevant securities as
at 26 March 2002 (the latest practicable date prior to the publication
of this document):
Number of Number of
Name Innogy Shares Innogy ADSs
Deutsche Bank AG London 3,608,044 --
Winterthur - Versicherungen 727,600 --
(iv) Ross Sayers and his immediate family have dealt for value in Innogy
Shares during the disclosure period as follows:
Date Nature of transaction Number Price (pence)
9 March 2001 Purchase 16,000 182
(v) Save as disclosed below, none of the subsidiaries of Innogy, pension
funds of Innogy or of a subsidiary of Innogy, financial and other
professional advisers to Innogy (other than exempt market makers), nor
any persons with whom Innogy or any person who is an associate of
Innogy has an arrangement, or whose investments are managed on a
discretionary basis by fund managers (other than exempt fund managers)
connected with Innogy, have dealt for value in relevant securities
during the period commencing 17 February 2002 and ending on 26 March
2002 (being the latest practicable date prior to the publication of
this document).
Over the last 12 months, Deutsche Bank has dealt for value in Innogy
Shares and Innogy ADSs through Deutsche Bank Securities Inc., New York
as follows:
Innogy shares
Date Nature of transaction Number Price
25 February 2002 Purchase 1,720 242p
25 February 2002 Sale 1,720 242p
4 March 2002 Purchase 87,600 256p
4 March 2002 Sale 87,600 256p
20 March 2002 Purchase 27,200 259p
20 March 2002 Purchase 27,200 259p
20 March 2002 Purchase 27,200 259p
20 March 2002 Sale 13,600 259p
20 March 2002 Sale 13,600 259p
22 March 2002 Purchase 14,150 273p
Innogy ADSs
Date Nature of transaction Number Price
7 March 2002 Purchase 200 US$34.2
7 March 2002 Purchase 100 US$34.3
7 March 2002 Purchase 400 US$34.3
7 March 2002 Purchase 200 US$34.4
7 March 2002 Purchase 200 US$34.4
7 March 2002 Purchase 100 US$34.5
7 March 2002 Purchase 100 US$34.5
7 March 2002 Sale 1,300 US$34.3
Save as disclosed above, it has not been possible to ascertain the
dealings and interests of Deutsche Bank AG (the ultimate holding
company of Deutsche Bank AG London) and its worldwide subsidiaries in
the relevant securities. If further enquiries reveal such a dealing or
an interest, it will be discussed with the Panel and, if appropriate,
will be disclosed to Innogy
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Shareholders. Any details so disclosed will be made available for
inspection at the address in paragraph 11 below.
Nature of Number of Price per share
transaction shares Low High
CSFB Zurich Purchase 70,693 246p 246p
Sale 70,693 246p 246p
CSFB International Purchase 5,499 250p 250p
Sale Nil - -
Pershing Ltd. Purchase 1,186,509 240p 270p
Sale 4,180,781 235p 271p
The dealings set out above have been aggregated in accordance with
Panel statement RS8 dated 21 February 2002, namely all purchases and
all sales during the offer period have been aggregated. Purchases and
sales have not been netted off and the highest and lowest rates have
been stated. A full list of all dealings is available for inspection
at the address in paragraph 11 below.
(vi) Over the last 12 months Merrill Lynch has dealt for value in Innogy
Shares and Innogy ADSs through Merrill Lynch, Pierce, Fenner & Smith
Inc. (MLPFS) as follows: Innogy Shares
Date Nature of transaction Number Price
12 April 2001 Sale 19,900 207p
12 April 2001 Purchase 19,900 206p
11 June 2001 Purchase 11,800 219p
11 June 2001 Sale 11,800 220p
26 June 2001 Purchase 4,800 206p
27 June 2001 Sale 4,800 211p
17 July 2001 Sale 15,700 229p
17 July 2001 Purchase 15,700 228p
25 July 2001 Purchase 93 203p
29 August 2001 Purchase 61 229p
16 October 2001 Purchase 379 193p
7 November 2001 Purchase 40,000 202p
7 November 2001 Sale 40,000 208p
15 November 2001 Sale 379 214p
27 November 2001 Purchase 26 198p
30 November 2001 Purchase 205 190p
12 December 2001 Sale 231 191p
11 January 2002 Sale 450 199p
27 February 2002 Purchase 498 250p
Innogy ADSs
Date Nature of transaction Number Price
5 July 2001 Sale 12,500 US$30.3
5 July 2001 Purchase 12,500 US$30.3
15 August 2001 Purchase 100 US$31.7
15 August 2001 Purchase 100 US$31.7
15 August 2001 Purchase 200 US$31.7
15 August 2001 Purchase 300 US$31.7
15 August 2001 Purchase 3,100 US$31.7
15 August 2001 Purchase 6,200 US$31.7
15 August 2001 Sale 10,000 US$31.7
12 March 2002 Sale 1,720 US$35.3
12 March 2002 Purchase 1,720 US$35.2
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Over the last 12 months Merrill Lynch has dealt for value in Innogy
ADSs through Merrill Lynch International as follows: Innogy ADSs
Date Nature of transaction Number Price
23 March 2001 Purchase 20,000 US$26.1
26 March 2001 Purchase 20,000 US$26.2
26 March 2001 Purchase 19,130 US$26.2
26 March 2001 Purchase 10,000 US$26.2
27 March 2001 Purchase 18,000 US$26.1
28 March 2001 Purchase 10,000 US$26.3
28 March 2001 Purchase 10,000 US$26.3
28 March 2001 Purchase 10,000 US$26.2
5 July 2001 Purchase 12,500 US$30.3
1 August 2001 Sale 70,000 US$34.2
6 August 2001 Sale 19,248 US$33.2
15 August 2001 Purchase 10,000 US$31.7
21 September 2001 Purchase 5,000 US$28.9
12 March 2002 Purchase 1,720 US$35.3
As of the close of business on 26 March 2002 (the last practicable
date prior to the publication of this Offer Document) 498 Innogy
Shares were held by MLPFS and 115,932 Innogy ADSs were held by Merrill
Lynch.
(vii)Save as disclosed above, none of the Offeror, Directors of the
Offeror, Directors of RWE, their immediate families and persons acting
in concert with the Offeror or who have irrevocably committed
themselves to accept the Offer, the Directors of Innogy and their
immediate families, owns or controls or (in the case of the Directors
of the Offeror and Innogy and the Directors of RWE) is interested in
any relevant securities, nor has any such person dealt for value
therein during the disclosure period; and none of the subsidiaries of
Innogy, pension funds of Innogy or of a subsidiary of Innogy,
financial or other professional advisers to Innogy (other than exempt
market makers) and any person whose investments are managed on a
discretionary basis by fund managers (other than exempt fund managers)
connected with Innogy, owns or controls any relevant securities, nor
has any such person dealt for value therein during the disclosure
period.
5 Material contracts
(a) The following contracts have been entered into by members of the RWE Group
otherwise than in the ordinary course of business since 17 February 2000
(the date two years prior to the commencement of the Offer Period) and are
or may be material:
(i) On 4 July 2000 RWE and VEW entered into a merger agreement (the
"Agreement") whereby each party agreed to transfer its entire assets
with all rights and obligations by way of dissolution excluding
liquidation pursuant to the German Transformation Act
(Umwandlungsgesetz) to RWE Gesellschaft fur Beteiligungen mbH which
has subsequently been transformed into RWE Aktiengesellschaft fur
Beteiligungen ("RWE (new)"). The name of the transferee entity has
meanwhile been changed to RWE Aktiengesellschaft. The Agreement sets
out details on the structure of the RWE (new) Group and the
consequences of the merger for employees of the parties and their
representatives. The merger became effective upon registration in the
Commercial Register (Handelsregister) of RWE (new) on 24 November
2000.
(ii) On 2 October 2000 Merrill Lynch on behalf of GBVGesellschaft fur
Beteiligungsverwaltung mbH, a wholly owned subsidiary of RWE, made a
recommended cash offer for all the issued and to be issued shares in
Thames Water. On 9 November 2000 the offer was declared unconditional
in all respects. On 29 December 2000 RWE on behalf of the offeror
announced, after having received 94.48 per cent. valid acceptances,
that it intended to acquire all
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outstanding Thames Water Shares under the compulsory acquisition
procedures in the Companies Act, and pursuant to this now owns all
such shares.
(iii)On 5 July 2001 RWE-DEA Aktiengesellschaft fur Mineraloel und Chemie
("RWE-DEA") and Deutsche Shell GmbH ("DS") entered into a Joint
Venture Agreement in order to combine their downstream oil businesses
by DSseparating its business from other businesses and contributing it
pursuant to the Germany Transformation Act (Umwandlungsgesetz) to DEA
Mineraloel AG in consideration for new shares therein. Before the
transaction DEA Mineraloel AG was a 100 per cent. subsidiary in
RWE-DEA. It has been transformed into the legal form of a GmbH and
meanwhile renamed Shell & DEA Oil GmbH ("SDO").
RWE-DEA and DS each hold a 50 per cent. shareholding in SDO. Important
decisions are reserved to the unanimous consent of a Joint Venture
Committee with equal representation of both partners. The management
has equally been composed from both sides. Various intercompany
relations are regulated in the Joint Venture Agreement.
The Agreement was completed by the contribution of a DS downstream
business to SDO in January 2002. As of 1 July 2004 DS will purchase an
additional stake of 1 per cent. in SDO. RWE-DEA has a put option on
its entire participation in the Joint Venture which can be exercised
between 1 July 2003 and 1 July 2004.
(iv) On 16 September 2001, an Agreement and Plan of Merger was entered into
among RWE, Thames Water Aqua Holdings GmbH, Apollo Acquisition Company
(both directly or indirectly wholly owned subsidiaries of RWE) and
American Water Works Company, Inc. ("American Water Works"). The
Merger Agreement provides for the merger of Apollo with and into
American Water Works upon the terms, and subject to the conditions, of
the Merger Agreement. As the surviving corporation, American Water
Works will continue to exist as an indirect wholly-owned subsidiary of
RWE. The merger will be effective at the time American Water Works
files a certificate of merger with the Secretary of State of the State
of Delaware (or at a later time, if agreed upon between the parties
and specified in the certificate of merger). The merger has been
approved by American Water Works shareholders. The completion of the
merger is expected as promptly as practicable after all regulatory
approvals have been received, which is expected to take place in the
first half of 2003. Upon completion of the merger, American Water
Works shares will automatically be cancelled and will cease to exist
and will be converted into the right to receive US$46.00 in cash,
without interest.
(v) On 29 January 2002, subsequent to a bidding procedure for the
privatisation of certain state assets, RWE Gas Aktiengesellschaft and
Fond narodniho majetku v Ceske republiky (the Czech National Property
Fund) entered into a Share Purchase Agreement (the "Agreement") for
the acquisition of 96.99 per cent. of the shares of Transgas, a.s.
("Transgas"), and certain percentages of shares in the eight regional
Czech gas distribution companies (the "RDCs").
Together with the shares in the RDCs already held by Transgas, RWE Gas
Aktiengesellschaft will acquire shareholdings between 46.6 per cent.
and 58.1 per cent. in the RDCs and achieve a majority shareholding in
six of the RDCs. The offer price was EUR4.1 billion.
The Agreement contains several conditions and stipulations customarily
found in a share purchase transaction in the course of a
privatisation. The parties to the Agreement have agreed to keep
strictly confidential and secret the contents of the Agreement save
for several specified exceptions.
The completion of the transaction is subject to the approval by the
Office for the Protection of Economic Competition of the Czech
Republic.
(b) The following contracts have been entered into otherwise than in the
ordinary course of business by Innogy Group members (or have been entered
into by members of the National Power Group and novated to or assigned to
Innogy plc in respect of which Innogy plc is liable to indemnify National
Power) since 17 February 2000 (two years prior to the commencement of the
Offer Period) which are or may be material.
(i) An agreement dated 16 March 2000 between National Power plc ("National
Power") and Innogy plc relating to the purchase by Innogy plc of
National Power's UK energy business (as
98
amended and restated on 17 August 2000). The consideration for the
sale was the issue by Innogy plc of 58,202 ordinary shares and
108,930,000 redeemable preference shares to National Power and the
assumption and discharge by Innogy plc of certain liabilities of
National Power. Under the terms of this agreement National Power gave
no warranties and only limited indemnities. Under the terms of this
agreement, Innogy plc has agreed to assume various liabilities of
National Power and provided certain indemnities in relation to the
liabilities assumed on acquisition of the business.
(ii) An agreement dated 16 March 2000 between National Power and NPEC
relating to the purchase by NPEC of the Energy Direct business carried
out by National Power (as amended and restated on 17 August 2000). The
consideration for the sale was the issue by NPEC of 1,000,000 ordinary
shares to National Power and the assumption and discharge by NPEC of
certain liabilities of National Power.
(iii)An agreement dated 16 March 2000 between National Power and the
company now known as Regenesys Technologies Limited relating to the
purchase by Regenesys Technologies Limited of the business carried out
by the Innogy Department of National Power including the development
of the Redox Energy Storage Technology Project (as amended and
restated on 17 August 2000). The consideration for the sale was the
issue by Regenesys Technologies Limited of 1,000,000 ordinary shares
to National Power and the assumption and discharge by Regenesys
Technologies Limited of certain liabilities of National Power.
(iv) An agreement dated 17 March 2000 between National Power and Innogy plc
relating to the sale (or procurement of sale) by National Power and
the purchase by Innogy plc of the entire issued (and to be issued)
share capital in certain of the subsidiaries of National Power. The
consideration for the sale was the issue by Innogy plc of 67,586
ordinary shares to National Power and (in respect of shares
transferred to Innogy plc by National Power International Limited
(NPIL), a subsidiary of National Power) the issue by Innogy plc of one
ordinary share to NPIL.
(v) An agreement dated 20 July 2000 between Deeside Power Development
Company Limited (DPDCL), a wholly-owned subsidiary of National Power,
National Power and Innogy plc relating to the sale and purchase by
DPDCL of the Deeside power station from Innogy plc for a cash sum of
(pound)200 million.
(vi) An agreement dated 21 August 2000 between National Power, Innogy plc,
and Innogy Holdings plc regarding the terms of the demerger of Innogy
plc from National Power under which, in satisfaction of a dividend in
specie, National Power agreed to transfer on 2 October 2000 the whole
of the issued share capital of Innogy plc to Innogy Holdings plc. In
return, Innogy Holdings plc issued ordinary shares to the holders of
National Power ordinary shares. Each shareholder on the register of
members of National Power on the relevant date received one ordinary
share for every National Power ordinary share they held.
(vii)An engineering, procurement and construction agreement dated 25
August 2000 between NWP Indian Mesa Wind Farm, L.P. ("NWP") and Vestas
American Wind Technology, Inc. ("Vestas") (the "EPC Agreement") for
the engineering, procurement and construction by Vestas of an 82.5
megawatt wind farm in Texas. The contract has now been completed and
the wind farm has been constructed. The sum paid to Vestas by NWP
under the EPC Agreement is US$40,178,563 plus Danish Kroner
279,312,500.
(viii) A share purchase agreement dated 26 February 2001 between A.E.P.
Resources, Inc. ("A.E.P. ")., A.E.P. Delaware Investment Company
(acting in its capacity as general partner of A.E.P. Holdings I C.V.)
("A.E.P. Holdings "), Xcel Energy, Inc. ("Xcel "), Xcel Energy
International, Inc. ("Xcel International "), Innogy Finance Limited
("Innogy Finance ") and Innogy Holdings plc ("Share Purchase Agreement
"). A.E.P., A.E.P. Holdings and Xcel International agreed to sell and
Innogy Finance agreed to purchase 94.75 per cent. of the issued share
capital of Yorkshire Power Group Limited ("Yorkshire ") (the
"Acquisition Shares "). The aggregate consideration payable by Innogy
Finance for the Acquisition Shares acquired was US$726.4 million. The
agreement contains warranties from A.E.P. and Xcel International
regarding Yorkshire covering areas which are typical for a transaction
of this nature including accounts and financial matters, commercial
matters, taxation, properties, employees and
99
pensions. The maximum liability of each of A.E.P. and Xcel
International for claims under the share purchase agreement shall not
exceed(pound)146.3 million. Innogy Finance's obligations under the
agreement are guaranteed by Innogy Holdings plc.
(ix) An intra group sale and purchase agreement dated 8 June 2001 between
Yorkshire Energy Limited ("YEL") (a 100 per cent. subsidiary of Innogy
plc) and Yorkshire Armada Limited ("YAL") (a 100 per cent. subsidiary
of YEL) for the sale by YEL to YAL of its 6.97 per cent. interest in
the BG-operated Armada area gas fields. The agreement completed on 7
November 2001.
(x) A business and share sale agreement dated 31 July 2001 between
Yorkshire Electricity Group plc ("YEG"), Npower Yorkshire Limited
("NYL") and Innogy Holdings plc. YEG agreed to sell and NYL agreed to
buy the supply business of YEG and the entire share capital of certain
companies owned by YEG. The aggregate consideration for the business
was (pound)713.6 million. The terms of the agreement provide for YEG
and NYL to enter into an agency agreement and a call and put option
agreement on completion. Under the agreement, Innogy guarantees to YEG
all of NYL's obligations, commitments, undertakings, warranties and
indemnities.
(xi) A share sale agreement dated 6 August 2001 between Npower Yorkshire
Limited, Innogy Holdings plc, CE Electric UK plc and Northern Electric
plc. Npower agreed to sell and Northern agreed to purchase 94.75 per
cent. of the issued share capital of Yorkshire Power Group Limited
("Yorkshire") which were transferred to Innogy Finance under the share
purchase agreement dated 26 February 2001, set out in (viii) above.
The consideration payable was (pound)238.5 million and an amount equal
to the estimated Yorkshire net cash and working capital to be
calculated as set out in the agreement.
(xii)An Electricity Business Sale Agreement dated 6 August 2001 between
Northern Electric plc ("Northern") and Npower Northern Limited
("NNL"). Northern agreed to sell and NNL agreed to buy the electricity
supply business of Northern as a going concern. The consideration was
(pound)81 million in cash and an amount equal to the estimated working
capital at 30 June 2001 plus interest to completion.
(xiii) A non electricity business sale agreement dated 6 August 2001
between Northern Electric Distribution Limited ("NEDL"), Npower
Northern Limited ("Npower"), Northern Electric & Gas Limited, Northern
Infocom Limited, Northern Metering Services Limited and Northern
Electric Supply Limited (together "Northern Subsidiaries") and
Northern Electric plc ("Northern"). Npower agreed to purchase and NEDL
agreed to sell the goodwill and assets of the supply business of NEDL
as a going concern, as set out in the electricity business sale
agreement, of the same date, summarised in (xii) above. The Northern
Subsidiaries agreed to sell certain of their assets relating to the
supply business. The aggregate consideration payable by Npower for the
acquisition of the supply business was approximately (pound)257
million. The completion and transfer of the supply business under the
Agreement was simultaneous with the share sale agreement of the same
date summarised in (xii) above. Northern is party to the Agreement for
the purpose of performing certain obligations and receiving certain
rights and benefits in relation to the transfer of relevant employees.
(xiv)A share purchase agreement dated 26 September 2001 between Yorkshire
Energy Limited ("YEL") and GB Gas Holdings Limited ("GBGH") for the
sale by YEL of its shares in Yorkshire Armada Limited (as detailed in
(ix) above) to GBGH. Innogy plc acted as guarantor in relation to this
sale. The consideration was (pound)47.4 million.
(xv) A framework agreement dated 24 February 2001, between Teesside Power
Limited and Northern Electric plc (novated to Innogy on 28 September
2001). As part of the acquisition of the electricity supply business
of Northern Electric as summarised in (xi) above, Innogy acquired a
long term power purchase arrangement in respect of 400 megawatts of
output from the power station operated by Teesside Power Limited. The
contract in the ordinary course of events runs until 2008. The
purchaser is Npower Northern Limited whose obligations are subject to
a guarantee from Innogy plc.
100
6 UK Taxation
The following paragraphs, which are intended as a general guide only and are
based on current UK legislation and Inland Revenue practice, summarise certain
limited aspects of the uk taxation consequences of acceptance of the Offer. They
relate only to the position of Innogy Shareholders who (unless the position of
non-UK resident Innogy Shareholders is expressly referred to) are resident or of
individuals ordinarily resident in the United Kingdom for tax purposes and who
hold their Innogy Shares beneficially as an investment.
(a) Taxation of Chargeable Gains
Liability to United Kingdom taxation of chargeable gains in respect of the
disposal of Innogy Shares pursuant to the Offer will depend on each Innogy
Shareholder's individual circumstances and on whether an Innogy Shareholder
accepts the consideration in cash or elects for the Loan Note Alternative.
(i) Cash
To the extent an Innogy Shareholder receives cash under the Offer,
this will constitute a disposal or part disposal of his Innogy Shares
for the purposes of United Kingdom taxation of chargeable gains. Such
a disposal may give rise to a liability for United Kingdom taxation of
chargeable gains depending on the Innogy Shareholder's individual
circumstances.
An alternative treatment may be possible where an Innogy Shareholder
opts for a mixture of cash and Loan Notes. If the amount of cash
received by the Innogy Shareholder is "small", as compared with the
value of his Innogy Shares, the receipt of the cash will not, unless
the Innogy Shareholder elects otherwise, trigger a disposal at that
time. A disposal will be triggered only when his Loan Notes are
disposed of and the amount of the cash received will be deducted from
his chargeable gains acquisition cost in the Loan Notes. Current
Inland Revenue practice is to regard a sum as "small" for these
purposes if either (i) it is five per cent. or less of the value of
the Innogy Shares held by the particular Innogy Shareholder; or (ii)
it is (pound)3,000 or less, regardless of whether it satisfies the
five per cent. test. The advisability of adopting this alternative
treatment will depend upon an Innogy Shareholder's individual
circumstances, in particular the availability to an Innogy Shareholder
of any reliefs or exemptions from UK taxation on chargeable gains in
the tax year in which the cash is received.
(ii) Loan Notes
To the extent an Innogy Shareholder who (either alone or together with
persons connected with him) does not hold more than five per cent. of,
or of any class of, the shares in, or debentures of Innogy, receives
Loan Notes under the Offer, he should be treated as not having made a
disposal of his Innogy Shares for the purposes of UK taxation of
chargeable gains.
For an individual or other Innogy Shareholder who is not within the
charge to UK corporation tax, the Loan Notes should not constitute
qualifying corporate bonds for the purposes of UK taxation of
chargeable gains. Accordingly, for such an Innogy Shareholder any gain
or loss which would otherwise have arisen on a disposal of his Innogy
Shares should be "rolled-over" into the Loan Notes so that the Loan
Notes will be treated as the same asset as the Innogy Shares, acquired
at the same time as the Innogy Shares and for the same acquisition
cost. A disposal (including redemption or repayment) of Loan Notes by
such a holder may give rise to a liability to UK taxation of
chargeable gains. Any chargeable gain or allowable loss on disposal of
the Loan Notes should be calculated taking into account the allowable
original cost to the holder of acquiring the relevant Innogy Shares.
Indexation allowance on that cost should be available (when
calculating a chargeable gain but not an allowable loss) in respect of
any period of ownership of the Innogy Shares up to April 1998.
Thereafter some taper relief may be available which will reduce the
amount of the chargeable gain realised on the disposal.
For an Innogy Shareholder within the charge to corporation tax, the
Loan Notes will be qualifying corporate bonds for the purposes of UK
taxation of chargeable gains. For such a holder, any gain or loss
which would otherwise have arisen on a disposal of its Innogy Shares
for a consideration equal to market value at the time of the exchange
of the Innogy Shares for
101
Loan Notes will be "held over" and deemed to arise on a subsequent
disposal (including redemption or repayment) of the Loan Notes. No
indexation allowance will be available for the period of ownership of
the Loan Notes and, except to the extent any gain or loss which would
have otherwise arisen on the disposal of its Innogy Shares was "held
over" and crystallises on a subsequent disposal of the Loan Notes, no
chargeable gain or allowable loss will arise on such a disposal. There
may, however, be a charge to tax as income (see (b) below).
In certain circumstances, the above rules regarding the "roll-over" or
"hold over" of any gain or loss will not apply to an Innogy
Shareholder who (either alone or together with persons connected with
him), holds more than five per cent. of, or of any class of, the
shares in, or debentures of Innogy. Such persons are advised that an
application for clearance has been made to the Inland Revenue under
Section 138 of the Taxation of Chargeable Gains Act 1992 in respect of
the Offer and, provided that such clearance is given, the benefit of
the above rules regarding the "roll-over" or "hold over" of any gain
or loss, will be available to such Innogy Shareholders. It is not a
condition of the Offer that such clearance is obtained.
(b) Taxation of Income
Payments of interest on the Loan Notes may be made without withholding on
account of Uk income tax.
UK resident holders of Loan Notes will generally be liable to UK income tax
or corporation tax on the amount of any interest received on their Loan
Notes.
In the case of individual or other non-corporate holders of Loan Notes, a
charge to tax on income under the "accrued income scheme" may arise on a
transfer of Loan Notes in respect of which interest has accrued since the
preceding interest payment date.
For a holder of Loan Notes within the charge to UK corporation tax,
profits, gains and losses and fluctuations in the value of the Loan Notes
(whether attributable to currency fluctuations or otherwise) will be taxed
or relieved as income, broadly in accordance with the holder's authorised
accounting method.
(c) Other Direct Tax Matters
Different tax treatment may apply to Innogy Shareholders who have acquired
or agreed to acquire their Innogy Shares by exercising options under the
Innogy Share Incentive Plans, including a possible charge to income tax
when such an option is exercised.
(d) Stamp Duty
No stamp duty or stamp duty reserve tax should be payable by Innogy
Shareholders as a result of accepting the Offer or on the issue of the Loan
Notes.
Under current Inland Revenue practice, no stamp duty or stamp duty reserve
tax will be payable on the transfer or sale of (or agreement to transfer)
Loan Notes.
The above summary is intended only as a general guide to the taxation position
under uk tax legislation and does not constitute tax or legal advice. Any person
who is in doubt as to his taxation position or who requires more detailed
information should consult his own professional tax adviser.
7 US and German Taxation
(a) US Taxation
The following summary describes certain material US federal income tax
consequences that may be relevant to US Holders of Innogy Securities that
are considering the Offer.
(i) This summary provides general information only and is directed solely
at US Holders who hold their Innogy Securities as capital assets and
whose functional currency is the US dollar. This summary does not
discuss all the tax consequences that may be relevant to US Holders in
light of their particular investment circumstances, such as investors
subject to special tax rules, including: partnerships, banks, thrifts,
real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies and
tax-exempt investors,
102
US Holders who received their Innogy Securities in return for services
rendered or in connection with their employment, persons that own
(directly or indirectly) 10 per cent. or more of Innogy voting stock
or persons that hold their Innogy Securities as part of a hedge,
straddle or other integrated transaction. This summary does not
include descriptions of any alternative minimum tax consequences or
the tax laws of any state or local government or of any foreign
government that may be applicable to US Holders. Moreover, this
summary does not discuss special tax provisions which may apply to
individuals who relinquished their US citizenship or residence. This
summary is based on the Internal Revenue Code of 1986, the Treasury
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof, and all of which
are subject to change, possibly with retroactive effect, or different
interpretations. No ruling has been requested from the Internal
Revenue Service in connection with the Offer and no assurance can be
given that the treatment described herein will be accepted by the
Internal Revenue Service or, if challenged, by a US court.
The us federal income tax rules are complex. The discussion set forth below
is included for general information only and may not be applicable
depending upon a holder's particular situation. us Holders should consult
their tax advisers with respect to the current and possibly future federal,
state, local and foreign tax consequences to them of accepting the Offer.
(ii) US Holders who sell their Innogy Securities pursuant to the Offer will
generally recognise taxable gain or loss equal to the difference
between their amount realised and their tax basis in their Innogy
Securities. Such gain or loss generally will be US-source capital gain
or loss and will be long-term if such US Holders held their Innogy
Securities for more than one year. US Holders who receive US dollars
in exchange for their Innogy ADSs will have an amount realised equal
to the payments they receive. Although the law regarding US Holders
who receive foreign currency in exchange for securities in a tender
offer is unclear, cash basis taxpayers, or accrual basis taxpayers
that make an election, who receive pounds sterling in exchange for
their Innogy Securities should have an amount realised equal to the
dollar value of the pounds sterling they receive, calculated using the
spot rate on the date the Offeror makes the funds available to the
relevant payment agent. Accrual basis taxpayers that do not make an
election who receive pounds sterling in exchange for their Innogy
Securities should have an amount realised equal to the dollar value of
the pounds sterling received, calculated using the spot rate on the
date such US Holders' tenders are irrevocably accepted; such US
Holders may realise a foreign currency exchange gain or loss resulting
from fluctuations in the US dollar/pound sterling exchange rate
between the date their tenders are irrevocably accepted and the date
the Offeror makes the funds available to the relevant payment agent.
US Holders who receive pounds sterling may recognise foreign currency
exchange gain or loss due to fluctuations in the exchange rate upon a
subsequent conversion into US dollars of the pounds sterling received.
Any foreign currency exchange gain or loss will be ordinary income or
loss and will be US-source gain or loss.
In its most recent annual report on Form 20-F filed with the SEC in
respect of the financial year ended 31 March 2001, Innogy stated its
belief that it was not a passive foreign investment company (a "PFIC")
for US Federal income tax purposes. This status must be determined
annually but the Offeror assumes this to continue to be true. If
Innogy were to be a PFIC, the tax consequences to the US Holders
could, depending upon the individual circumstances of each holder,
differ from those described herein.
(iii)Non-corporate US Holders may be subject to US federal backup
withholding tax (imposed at a rate of 30 per cent.) and information
reporting on payments received under the Offer if they fail to furnish
and certify their correct taxpayer identification number in the manner
required or otherwise fail to establish a basis for exemption. To
prevent backup withholding, US Holders should complete Internal
Revenue Service Form W-9 or a valid substitute form. Amounts withheld
from payments to US Holders generally will be allowed as a credit
against the US Holders' US federal income tax liability, provided that
the required information is furnished to the Internal Revenue Service
in a timely manner.
103
(b) German Taxation
(i) Interest on the Loan Notes - German withholding tax Interest on the
Loan Notes may be paid by the Offeror without having to account for
any German withholding tax.
(ii) Loan Notes - other German tax issues Holders of Loan Notes who are not
resident in Germany and have no connection with Germany other than by
virtue of their holding of Loan Notes should incur no liability to
German tax in respect of payments of interest or principal on the Loan
Notes or any sale or other disposal of their Loan Notes.
No German stamp or other registration duty should be due on the issue,
transfer or sale of (or agreement to transfer)Loan Notes.
(iii) Proposed EU Savings Directive
On 13 December 2001 the Council of the European Union published a
revised draft directive regarding the taxation of savings income, for
the purpose of negotiations with third parties. It is proposed that
each EUMember State under its domestic law requires paying agents
(within the meaning of the directive)established within its territory
to provide to the tax authorities of another EUMember State details of
the payment of interest or other similar income such as discount or
premium to an individual resident in that other EUMember State.
However, for a transitional period of seven years Austria, Belgium and
Luxembourg may opt instead to withhold tax from such payments. The
proposed directive is to be implemented by the Member States by 1
January 2004. It is envisaged that the Council of the EUwill decide by
unanimity on a final text of the directive no later than 31 December
2002. However, since the implementation of the proposal is subject to
certain non EUMember States and associated territories and
dependencies of EUMember States also agreeing to supply information or
imposing a withholding tax it is currently not possible to predict
whether, when, or in what form the proposal will ultimately be
adopted.
The above summary is intended only as a general guide to the taxation position
under German tax legislation and does not constitute tax or legal advice. Any
person who is in doubt as to his taxation position or who requires more detailed
information should consult his own professional tax adviser.
8 Sources and Bases of Information
(a) Unless otherwise stated:
(i) financial information relating to Innogy has been extracted from the
relevant published audited annual report and unaudited interim results
of Innogy and/or other public statements made by Innogy; and
(ii) financial information relating to RWE has been extracted from the
relevant published audited annual report and/or other public
statements made by RWE.
(b) The value of the issued share capital of Innogy ((pound)3.1 billion; EUR5.0
billion) is calculated on the basis of 1,132.3 million Innogy Shares in
issue as at 21 March 2002.
(c) The enterprise value of Innogy is calculated to be approximately (pound)5.2
billion (EUR8.5 billion) on the basis of a fully diluted share capital of
1,183.4 million Innogy Shares less an adjustment of 15.8 million Innogy
Shares (being RWE's estimate of the appropriate adjustment for the time
apportionment of options that could be exercised under certain of Innogy's
Save As You Earn share option schemes), plus RWE's estimate of Innogy's net
debt at closing of approximately (pound)2.1 billion (EUR3.4 billion) less
an amount of (pound)62 million (EUR100 million) (being RWE's estimate of
option money proceeds if all options (adjusted for time apportionment) were
exercised).
(d) RWE's estimate of net debt at closing excludes any movement from
operational cash flow from 31 March 2002 until closing.
(e) The Closing Prices referred to have been derived from the Official List of
the London Stock Exchange or, in the case of Innogy ADSs, from Reuters. The
average closing price of an Innogy Share and an Innogy ADS for the one
month to 15 February 2002 have been derived from Reuters.
104
(f) Exchange rates of (pound)1:EUR1.6160 and (pound)1:US$1.4270 have been used
throughout this document.
9 Service Contracts
(a) Each of the Executive Directors named below has entered into a service
contract with Innogy providing for the relevant remuneration and benefits
described below:
Name Annual Salary*
Dr. Brian Count (pound)430,000
Mike Bowden (pound)220,000
Andrew Duff (pound)290,000
Steve Fletcher (pound)290,000
Tim Weller (pound)240,000
* Each of the executive directors' salaries is reviewed annually at the
board's discretion.
(b) Brian Count has a contract which can be terminated by Innogy by giving not
less than 12 months' written notice, or immediately, without notice,
provided Innogy makes a payment to Brian Count equal to the aggregate of
(i) 100 per cent. of his prevailing annual salary and (ii) (pound)9,994
uplifted by the percentage increase in the General Index of Retail Prices
since 1 April 1997, as published by the British Government. If Innogy
terminates Brian Count's employment otherwise than for cause (as defined in
his service agreement) or Brian Count is constructively dismissed (as
defined in his service agreement) Innogy shall, by way of liquidated
damages, at Brian Count's request, (i) procure he becomes entitled to an
immediate early retirement pension under Executive Section of the Innogy
Group Pension Scheme and (ii) pay him a lump sum equal to the aggregate of
100 per cent. of his prevailing annual salary and (pound)9,994 uplifted as
described above (less certain deductions). Brian Count may terminate his
employment by giving not less than six months' written notice.
(c) Mike Bowden has a contract to serve as Managing Director of Corporate
Services and Company Secretary which is terminable by Innogy giving 12
months' prior written notice or, immediately by Innogy making a payment
equal to 12 months' salary. In addition, Mike Bowden may terminate his
contract by giving six months' prior written notice to Innogy and Innogy
may make a payment of six months' salary in lieu of notice.
(d) Mike Bowden's previous service contract was as Company Secretary and
(non-board) Director of Legal and Regulatory Affairs. This contract was
terminable by Innogy on the giving of not less than 12 months' prior
written notice or by Mike Bowden on the giving of not less than six months'
prior written notice. The service agreement allowed Innogy, at its sole and
absolute discretion, to terminate Mike Bowden's employment immediately on
the payment of 12 months' salary. His basic annual salary under this
contract was (pound)180,000. He was eligible to participate in any annual
performance plan and any long term incentive plan established for him by
Innogy. Other benefits were provided under the same terms as described for
Executive Directors.
(e) Steve Fletcher's contract may be terminated by Innogy giving not less than
12 months' prior written notice or by Steve Fletcher giving Innogy not less
than six months' prior written notice. Innogy may terminate Steve
Fletcher's employment immediately provided Innogy makes a payment to him
equal to 100 per cent. of his prevailing annual salary.
(f) Andrew Duff's contract may be terminated by Innogy giving not less than 12
months' prior written notice or by Andrew Duff giving Innogy not less than
six months' prior written notice. Innogy may terminate Andrew Duff's
employment immediately provided that it makes a payment to him equal to 100
per cent. of his prevailing annual salary. Andrew Duff has been issued with
a letter from Innogy confirming that in the event of him being retired
compulsorily under the Executive Section of the Innogy Group Pension Scheme
as a result of reorganisation or redundancy, he will be entitled, in
respect of any pension in the Scheme, to either (i) an immediate pension
under the Scheme if he is aged 50 or over, although the pension may be
reduced for early retirement, or (ii) to choose to receive his pension
under the Scheme if he has not reached age 50, although the pension may be
reduced for early retirement. This letter reflects his existing entitlement
under the rules of the Scheme.
(g) Tim Weller's contract may be terminated by Innogy giving 12 months' prior
written notice or, immediately by Innogy making a payment equal to 12
months' salary. Tim Weller may terminate his
105
contract by giving six months' prior written notice to Innogy and Innogy
may make a payment of six months' salary in lieu of notice. During the
first year of his employment (which commenced on 7 January 2002), Tim
Weller is entitled to receive a minimum bonus of 25 per cent. of his salary
paid in two tranches, the first to be paid in May 2002 in respect of the
period up to 31 March 2002 and the balance to be paid in May 2003 in
respect of the period from 1 April 2002 to 6 January 2003. After the first
year of his employment, Tim Weller is entitled to participate in the annual
performance bonus plan. In addition Tim Weller is eligible to participate
in the LTIP - see below.
(h) Executive Directors are eligible for the annual performance bonus, a
non-pensionable cash payment for achieving performance targets. The target
level payment to Executive Directors for the achievement of targets is 25
per cent. of base salary, while a maximum of 50 per cent. of base salary is
attainable where exceptional performance is achieved.
(i) Executive Directors participate in the LTIP. Awards under the LTIP vest if
the performance condition based on total shareholder return compared to the
comparator group (at least ten companies from the Utilities sector listed
in the FTSE 100 and FTSE 250 indices and other companies of a similar
profile with which it competes for capital and talent) is satisfied. If
Total Shareholder Return (as defined) over the three-year measurement
period results in it being ranked in the top quartile of the comparator
group, awards will vest in full. If performance is below the median
position within the Comparator Group (as defined), awards will be
forfeited. Where performance is equal to the median position, 50 per cent.
of the shares subject to awards will vest and be transferred to
participants. Where performance is between the median and upper quartile
positions, awards will vest pro rata on a linear scale.
(j) The Executive Directors may also participate in the Sharesave Plan. They do
not participate in Innogy's other share option plans but they hold options
over Innogy Shares granted in consideration of the cancellation of options
previously held over National Power plc shares.
(k) Each of Brian Count, Steve Fletcher and Mike Bowden have been issued with
letters from Innogy confirming that in the event of being retired
compulsorily under the Executive Section of the Innogy Group Pension Scheme
as a result of reorganisation or redundancy, they will each be entitled, in
respect of any pension in the Scheme to either (i) an immediate pension
under the Scheme, without any deduction for early retirement if they are
aged 50 or over, or (ii) to choose to receive their pension under the
Scheme, without any deduction for early retirement, if they have not
reached age 50. These letters reflect their existing entitlements under the
rules of the Scheme.
(l) The non-executive Directors (Ross Sayers, Yvonne Constance, Richard
Delbridge, Sir Brandon Gough and Sir Robin Mountfield) do not have service
contracts and have been appointed until the annual general meeting to be
held in 2003, subject to prior termination in accordance with the Articles
of Association. The non-executive Directors receive fees for their services
as follows:
Name Annual Fee
Ross Sayers (pound)175,000*
Yvonne Constance (pound)35,000 plus(pound)5,000 for chairing the Corporate Responsibility Committee
Richard Delbridge (pound)35,000 plus(pound)5,000 for chairing the Audit Committee
Sir Brandon Gough (pound)35,000 plus(pound)5,000 for chairing the Remuneration Committee
Sir Robin Mountfield (pound)35,000 plus(pound)5,000 for chairing the Health and Safety Committee
* Ross Sayers is provided with a company car and membership of a company
healthcare plan.
Save as disclosed above, there are no service contracts between any
Director of Innogy and any member of the Innogy Group having more than 12
months to run and no such contract has been entered into or amended within
the six months preceding the date of this document.
10 Other Information
(a) As an inducement to RWE to make the Offer, RWE and Innogy have entered into
a letter agreement. Such letter agreement provides for (i) Innogy to pay to
RWE a fee of (pound)20 million (EUR32 million) if the Offer lapses or is
withdrawn following a competing offer and such competing offer becomes or
is declared unconditional in all respects; and (ii) RWE to pay to Innogy
the same amount if the Offer
106
does not become or is not declared unconditional in all respects as a
result of the regulatory conditions to the Offer not being satisfied in
certain circumstances.
(b) Other than the letter agreement referred to in (a) above and save as
otherwise disclosed in this document, no agreement, arrangement or
understanding (including any compensation arrangement) exists between the
Offeror or any party acting in concert with the Offeror and any of the
Directors of Innogy, recent Directors of Innogy, holders of Innogy
Securities or recent holders of Innogy Securities having any connection
with or dependence upon the Offer.
(c) The Offer is not conditional on any financing arrangement. The total amount
of funds required by the Offeror to purchase all issued Innogy Securities
pursuant to the Offer and to pay fees and expenses related to the Offer and
the subsequent compulsory acquisition is estimated to be approximately
(pound)3.3 billion (EUR5.3 billion). The Offeror plans to obtain all funds
needed for the Offer and any subsequent compulsory acquisition of Innogy
Shares and Innogy ADSs through capital contributions and loans from RWE ,
which intends to use short-term financings and existing liquid resources to
raise such funds. RWE may later refinance such short-term financings
through long-term bond issues. The Offeror does not intend that the payment
of interest on, the repayment of or the security for, any liability
(contingent or otherwise) will depend to any significant extent on the
business of Innogy. Merrill Lynch has confirmed that resources are
available to the Offeror sufficient to satisfy full acceptance of the
Offer.
(d) No agreement, arrangement or understanding exists whereby any Innogy
Securities acquired in pursuance of the Offer will be transferred to any
other person, save that the Offeror reserves the right to transfer any
Innogy Securities to any of its subsidiaries.
(e) None of the Offeror, any person acting in concert with the Offeror, Innogy
and any associate of Innogy has any arrangement (including indemnity or
option arrangement) or any agreement or understanding, formal or informal,
of whatever nature with any person, relating to relevant securities of
Innogy or the Offeror which may be an inducement to deal or refrain from
dealing.
(f) Merrill Lynch has given and not withdrawn its written consent to the issue
of this document with the inclusion of its letter and the references to its
name, including the reference to its valuation of the Loan Notes, in the
form and context in which they appear.
(g) CSFB and Deutsche Bank have given and not withdrawn their respective
written consent to the issue of this document with the inclusion herein of
the references to their respective names in the form and context in which
they appear.
(h) The expenses of, or incidental to, the preparation and implementation of
the Offer will be paid by the RWE Group, if the Offer is successful, or
each party in respect of its own respective expenses, if the Offer is
unsuccessful.
(i) Save as disclosed in this document, there has been no material change in
the financial or trading position of the Offeror or of the RWE Group or in
any information published on behalf of the Offeror or of the RWE Group
since 31 December 2001, the date to which the latest audited accounts for
the RWE Group were prepared.
(j) Save in respect of the acquisition of the supply businesses of Yorkshire
Electricity Group plc and Northern Electric plc and the consequent impact
on net debt disclosed in this document and as otherwise disclosed in this
document, there has been no material change in the financial or trading
position of Innogy or in any information published on behalf of Innogy
since 31 March 2001, the date to which the latest audited accounts for
Innogy were prepared.
(k) On 18 January 2002, the Chairman of the Management Board of RWE called the
Chief Executive of Innogy to seek a meeting to present a proposal to the
Board of Innogy for its consideration.
On 22 January 2002, a further conversation took place between the Chairman
of the Management Board of RWE and the Chief Executive of Innogy. The CEO
of Innogy agreed to take RWE's request for a meeting to the regular Innogy
board of 30 January 2002. Following that board meeting, it was agreed that
RWE would present RWE's proposal to Innogy senior management at a
face-to-face meeting on 5 February 2002.
107
On 5 February 2002, there was a meeting attended by certain Management
Board members of RWE and certain board members of Innogy at which RWE
presented a specific proposal to Innogy, together with a rationale for the
business combination. At that meeting, it was agreed that RWE would write
to Innogy with some views on how it had approached its valuation of Innogy.
This letter was sent from the Chairman of
the Management Board of RWE to the Chief Executive of Innogy on 11 February
2002. On 12 February 2002, the Chief Executive of Innogy sent a holding
reply and on 15 February 2002 he replied more fully. On 19 February 2002,
the Chairman of the Management Board of RWE and the Chief Executive of
Innogy spoke on the telephone and it was agreed that there would be a
meeting between senior
executives of RWE and Innogy later that week. Following an exchange of
letters and telephone calls, a meeting between senior executives of RWE and
Innogy was held on 22 February 2002, at which a process of exchanging
certain limited information was initiated.
During the week of 25 February 2002, meetings took place between employees
of RWE and Innogy at which potential benefits of a transaction and aspects
of Innogy's business were discussed. A confidentiality agreement, allowing
for the exchange of certain limited non public information between RWE and
Innogy, was entered into on 28 February 2002. At a meeting between certain
Management Board members of RWE and certain board members of Innogy on 1
March 2002, it was agreed that RWE would revert to Innogy on 8 March 2002,
following completion of further analysis.
Further meetings and telephone conversations took place between RWE and
Innogy and their respective representatives over the following week and on
8 March 2002, certain members of the Management Board of RWE and certain
board members of Innogy met and RWE confirmed its earlier proposal and
requested further due diligence and a meeting involving each Company's CEO.
On 12 March 2002, the Chairman of the Management Board of RWE and the Chief
Executive of Innogy spoke on the telephone and RWE put forward an increased
proposal, subject to certain conditions. It was agreed that, in addition to
the information exchange already undertaken, RWE and its advisers would
conduct a further due diligence process, which commenced on 14 March 2002.
From 14 March 2002, until announcement of the Offer on 22 March 2002, there
were due diligence and organisational meetings and telephone conversations
between RWE and Innogy and their respective advisers.
On 20 March 2002, the Supervisory Board of RWE approved the Offer and on 21
March 2002 the board of Innogy agreed to recommend the Offer of 275p per
Innogy Share, subject to the settlement of the last open issues which took
place in the evening of 21 March 2002, with announcement of the Offer on 22
March 2002.
(l) Merrill Lynch is acting as the financial adviser to RWE and the Offeror in
connection with the Offer, for which it will receive customary fees,
together with reimbursement of reasonable expenses. In addition, RWE has
agreed to indemnify Merrill Lynch against, among other things, certain
claims, losses and expenses suffered or incurred by Merrill Lynch arising
from its engagement.
RWE has retained Lloyds TSBRegistrars as the Receiving Agent and The Bank
of New York as the Depository. Neither the Receiving Agent nor the
Depositary have been retained to make solicitations or recommendations.
They will receive reasonable and customary compensation for their services,
will be reimbursed for certain reasonable out-of-pocket expenses and will
be indemnified against certain liabilities and expenses in connection
therewith.
In addition, RWE has retained Georgeson Shareholder Communications to act
as the Information Agent in connection with the Offer. The Information
Agent will receive reasonable and customary compensation for its services,
will be reimbursed for certain reasonable out-of-pocket expenses and will
be indemnified against certain liabilities and expenses in connection
therewith.
Neither RWE nor the Offeror will pay any fees or commissions to any broker
or dealer or other person (except as set forth above) in connection with
the solicitations of tenders of Innogy Securities pursuant to the Offer.
108
Brokers, dealers, commercial banks and trust companies will be reimbursed
by RWE for customary mailing and handling expenses incurred by them in
forwarding offering material to their customers. (m) The RWE Group and the
Innogy Group have during the past two years entered into a number of arms'
length transactions in the ordinary course of business in relation to the
sale and purchase of electricity, coal, fuel, water and waste water
services.
(n) The Offeror is not aware of any jurisdiction where the making of the Offer
is prohibited by any administrative or judicial action pursuant to any
valid state statute of any state of the United States. If the Offeror
becomes aware of any valid US state statute prohibiting the making of the
Offer, the Offeror will make a good faith effort to comply with such US
state statute or seek to have such statute declared inapplicable to the
Offer. If, after such good faith effort, the Offeror cannot comply with any
such state statute, the Offer will not be made (and tenders will not be
accepted from or on behalf of) holders in such state. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made
by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Offeror by one or more registered brokers or dealers which
are licensed under the laws of such jurisdiction.
(o) None of the Offeror, RWE or, to the best knowledge of the Offeror or RWE,
any of the persons listed in paragraphs 2(a)-(c) of this Appendix or any
associate or majority-owned subsidiary of the Offeror, RWE or any of the
persons so listed, beneficially owns any equity security of Innogy, and
none of the Offeror, RWE or, to the best knowledge of the Offeror or RWE,
any of the other persons referred to above, or any of the respective
directors, executive officers or subsidiaries of any of the foregoing, has
effected any transaction in any equity security of Innogy during the past
60 days.
Except as described in this Offer Document, (a) there have not been any
contacts, transactions or negotiations between the Offeror, RWE, any of
their respective subsidiaries or, to the best knowledge of the Offeror or
RWE, any of the persons listed in paragraphs 2(a)-(c) of this Appendix, on
the one hand, and Innogy or any of its directors, officers or affiliates,
on the other hand, that are required to be disclosed pursuant to the rules
and regulations of the SEC and (b) none of the Offeror, RWE or, to the best
knowledge of the Offeror or RWE, any of the persons listed in paragraphs
2(a)-(c) of this Appendix has any contract, arrangement, understanding or
relationship with any person with respect to any securities of Innogy.
11 Documents Available for Inspection
Copies of the following documents will be available for inspection at the
offices of Allen & Overy, One New Change, London EC4M 9QQ, during usual business
hours on any week day (Saturdays, Sundays and public holidays excepted) while
the Offer remains open for acceptance:
(a) the notarial deed of incorporation of the Offeror and the articles of
incorporation (Satzung) of the Offeror and RWE;
(b) the memorandum and articles of association of Innogy;
(c) the published audited consolidated accounts of the RWE Group for the
financial year ended 30 June 2001 and for the truncated financial year
ended 31 December 2001;
(d) the published audited consolidated accounts of the Innogy Group for the
financial year ended 31 March 2001, containing also the proforma statutory
and comparative accounts for the Innogy Group for the financial year ended
31 March 2000;
(e) the service agreements of the Directors of Innogy of more than one year's
duration and related letters referred to in paragraph 9 above;
(f) the material contracts of the Innogy Group referred to in paragraph 5
above;
(g) the material contracts of the RWE Group referred to in paragraph 5 above
(apart from the contracts referred to at paragraphs 5(a)(iii) and (v),
which, with the consent of thePanel, are not available for inspection);
(h) the letter of valuation of the Loan Notes by Merrill Lynch dated 26 March
2002;
109
(i) the written consents referred to in paragraph 10 above;
(j) copies of the irrevocable undertakings to accept the Offer given by certain
of the Directors of Innogy and referred to in the letter from Merrill
Lynch;
(k) the inducement fee letter agreement referred to in paragraph 10(a) above;
(l) the form of the Loan Note Instrument; and
(m) a full list of all dealings where the Panel has given consent to
aggregation of dealings.
Additionally, RWE and the Offeror have filed with the SEC a Tender Offer
Statement on Schedule TO, together with exhibits, furnishing certain additional
information with respect to the Offer. In addition, Innogy has filed a
Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits,
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Free
copies of these documents are available on the SEC's website at www.sec.gov.
12 Certain Consequences of the Offer
(a) Market effect
The past performance of the price of Innogy Shares and Innogy ADSs is no
guide to the future performance of Innogy Securities.
The purchase of Innogy Securities pursuant to the Offer will reduce the
number of holders of Innogy Securities and the number of Innogy Securities
that might otherwise trade publicly and, depending upon the number of
Innogy Securities so purchased, could adversely affect the liquidity and
market value of the remaining Innogy Securities held by the public. In
addition, when the Offer becomes or is declared unconditional in all
respects, the Offeror intends to procure that Innogy applies to the UK
Listing Authority for official listing and to the London Stock Exchange for
the admission to trading of the Innogy Shares to be cancelled. It is
anticipated that such cancellation will take effect no earlier than 20
business days after the Offer becomes unconditional in all respects. The
Offeror would also intend to procure that Innogy applies for de-listing of
the Innogy ADSs from the New York Stock Exchange. Such de-listing and
cancellation would significantly reduce the liquidity and marketability of
any Innogy Securities not tendered in the Offer. The Offeror also may
request that Innogy should terminate the existing deposit agreement through
which the ADS programme is operated.
The value of all investments and the outcome from them can fall as well as
rise and not all the amount invested may be realised. Holders of Innogy
ADSs accepting the Offer and electing to receive consideration in US
dollars should be aware that they will be exposed to foreign currency risk.
(b) Public availability of information
In the event that Innogy Shares continue to be listed on the Official List
of the UK Listing Authority following the Offer becoming or being declared
unconditional in all respects, holders of Innogy Shares who have not
accepted the Offer will continue to receive the same financial and other
information from Innogy that Innogy is presently required by the Listing
Rules to send to such holders. If Innogy Shares are no longer listed on the
Official List of the UK Listing Authority following the Offer, Innogy would
no longer be required by those rules to make publicly available such
financial and other information.
The Innogy ADSs and the Innogy Shares (not for trading but in connection
with the listing of the Innogy ADSs) are currently registered under the
Exchange Act. Registration of such Innogy ADSs and Innogy Shares may be
terminated upon application of Innogy to the SEC if Innogy ADSs are neither
listed on a national securities exchange nor held by 300 or more beneficial
owners in the US. Termination of registration of Innogy ADSs and Innogy
Shares under the Exchange Act would substantially reduce the information
required to be furnished by Innogy to holders of Innogy ADSs and to the SEC
and would make certain provisions of the Exchange Act, such as the
requirements of Rule 13e-3 thereunder with respect to "going private"
transactions, no longer applicable to Innogy. If, as a result of the
purchase of Innogy ADSs pursuant to the Offer and prior to completing the
compulsory acquisition procedures referred to in paragraph 7 of Part B of
Appendix I above, Innogy is not required to maintain registration
110
of Innogy ADSs and Innogy Shares under the Exchange Act, the Offeror would
intend to cause Innogy to apply for termination of such registration.
(c) Margin Regulations
Innogy ADSs are currently "margin securities" under the regulations of the
Board of Governors of the US Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Innogy ADSs. Depending upon factors
similar to those described above regarding listing and market quotations,
it is possible that, following the Offer, the Innogy ADSs would no longer
constitute "margin securities" for purposes of the margin regulations of
the Federal Reserve Board and therefore could no longer be used as
collateral for loans made by brokers.
13 Regulatory Approvals
(a) EU Merger Control
The Offer gives rise to a concentration with a community dimension under
Council Regulation (EEC) 4064/89, as amended (the "Regulation") and it is
anticipated that a notification will be made to the European Commission in
the near future. The Offer is conditional on, amongst other things, the
European Commission indicating in terms satisfactory to the Offeror that it
does not intend to initiate an in-depth investigation under Article 6(1)(c)
of the Regulation in respect of the Offer or any matter arising therefrom.
The European Commission will only initiate such an in-depth investigation
if it finds that the Offer or any matter arising therefrom falls within the
scope of the Regulation and raises serious doubts as to the compatibility
of the concentration with the common market. Where the European Commission
finds that the Offer or any matter arising therefrom falls within the scope
of the Regulation but does not raise serious doubts as to the compatibility
of the concentration with the common market, it will not oppose it and will
declare that it is compatible with the common market. The European
Commission has one calendar month (beginning on the first working day
following the date on which a complete notification is received by the
European Commission) to make its decision whether to clear the notified
concentration or whether to initiate an in-depth investigation (subject to
a possible extension to six weeks).
(b) Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the regulations thereunder, RWE must observe a 30-calendar day
waiting period that begins when RWE files a Notification and Report Form
with respect to the Offer. RWE is in process of preparing that filing. The
Acquisition may be consummated after the expiration or early termination of
the waiting period. If either the Antitrust Division of the US Department
of Justice or the US Federal Trade Commission issues a request for
additional information or documentary material, the waiting period is
extended until the parties have complied with the request and observed an
additional 30-calendar day waiting period. Expiration or termination of the
applicable waiting period is one of the Conditions of the Offer.
111
APPENDIX VI
Definitions
"Acceptance Condition" the Condition as to acceptances set out
in paragraph (a) of Part A of Appendix I
to this document
"Acceptance Forms" the Form of Acceptance and, in relation
to holders of Innogy ADSs only, the
Letter of Transmittal and the Notice of
Guaranteed Delivery, accompanying this
document pursuant to the Offer
"Acquisition" the proposed acquisition of the whole of
the issued and to be issued share
capital of Innogy by the Offeror
pursuant to the Offer
"Agent's Message" a message transmitted by a Book-Entry
Transfer Facility to, and received by,
the Depositary and forming part of a
Book-Entry Confirmation that states that
such Book-Entry Transfer Facility has
received an express acknowledgement from
the participant in such Book-Entry
Transfer Facility tendering the
interests in Innogy ADSs that such
participant has received and agrees to
be bound by the terms of the Letter of
Transmittal and that the Offeror may
enforce such agreement against the
participant
"Book-Entry Confirmation" the confirmation of a book-entry
transfer of Innogy ADSs into the
Depositary's account at a Book-Entry
Transfer Facility
"Book-Entry Transfer Facility" each of the Depository Trust Company and
any other book-entry transfer facility
"business day" a day on which banks are open for
business in London (excluding Saturdays,
Sundays and public holidays)
"certificated" or "certificated form" in relation to a share or other
security, a share or other security
title to which is recorded in the
relevant register as being held in
certificated form
"CEO" chief executive officer
"CHP" combined heat and power
"City Code" the City Code on Takeovers and Mergers
"Closing Date" 3.00 p.m. (London time), 10.00 a.m. (New
York City time), on 26 April 2002,
unless and until the Offeror, with the
consent of the Panel or in accordance
with the City Code and in accordance
with the Exchange Act, shall have
extended the Offer, in which case the
term "Closing Date" shall mean the
latest time and date at which the Offer,
as so extended by the Offeror, will
expire or, if earlier, the time at which
the Conditions are satisfied, fulfilled
or, to the extent permitted, waived
"Closing Price" the middle-market quotation of an Innogy
Share at the close of business on a
particular trading day as derived from
the Daily Official List or, as the case
may be, the last reported sale price of
an Innogy ADS as reported on the
NYSEComposite Transactions Tape
"Companies Act" the Companies Act 1985, as amended
"Conditions" the conditions of the Offer set out in
Part A of Appendix I to this document,
and "Condition" means any one of them
"Credit Suisse First Boston" or "CSFB" Credit Suisse First Boston (Europe)
Limited
"CREST" the relevant system (as defined in the
Regulations) operated by CRESTCo
"CRESTCo" CRESTCo Limited
112
"CREST member" a person who has been admitted by
CRESTCo as a system-member (as defined
in the Regulations)
"CREST participant" a person who is, in relation to CREST, a
system-participant (as defined in the
Regulations)
"CREST sponsor" a person who is, in relation to CREST, a
sponsoring system-participant (as
defined in the Regulations)
"CREST sponsored member" a CREST member admitted to CREST as a
sponsored member under the sponsorship
of a CREST sponsor
"Daily Official List" the Daily Official List of the London
Stock Exchange
"Depositary" The Bank of New York, at addresses set
forth in the Letter of Transmittal
"Deutsche Bank" Deutsche Bank AG London
"Directors of RWE" the members of the Management Board
referred to in paragraph 2(a) of
Appendix V to this document
"Directors of Innogy" the directors of Innogy referred to in
paragraph 2(d) of Appendix V to this
document
"Eligible Institution" a financial institution which is a
participant in the Securities Transfer
Association Medallion Program, the New
York Stock Exchange Medallion Program or
the Stock Exchange Medallion Program
"EUR" euro, the currency introduced at the
start of the third stage of economic
union pursuant to the treaty
establishing the European Union
"Exchange Act" the United States Securities Exchange
Act of 1934 (as amended) and the rules
and regulations promulgated thereunder
"Financial Services Authority" Financial Services Authority Limited
"Form of Acceptance" in relation to Innogy Shares, the form
of acceptance, authority and election
relating to the Offer which is being
sent with the Offer Document for use by
Innogy Shareholders wishing to accept
the Offer
"Further Terms" the further terms of the Offer set out
in Part B of Appendix I to this document
"GEMA" the Gas and Electricity Markets
Authority
"Helpline" the telephone helpline run by the
Information Agent (0845 300 2527 from
the UK, 866 867 1144 from the US and +44
20 7335 7287 from other countries)
"Information Agent" Georgeson Shareholder Communications
Limited (in the United Kingdom) and
Georgeson Shareholder Communications,
Inc. (in the United States)
"Initial Offer Period" the period during which the Offer
remains conditional, which commences on
the date of this document and expires on
the earlier of the Offer lapsing or
becoming or being declared unconditional
in all respects in accordance with its
terms
"Innogy" Innogy Holdings plc
"Innogy ADRs" American Depositary Receipts evidencing
Innogy ADSs
"Innogy ADSs" American Depositary Shares, each
representing 10 Innogy Shares, evidenced
by Innogy ADRs
"Innogy Group" Innogy and its subsidiary undertakings
and, where the context admits, each of
them
"Innogy Securities" Innogy Shares and Innogy ADSs
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"InnogyShareIncentivePlans" the Innogy Holdings Unapproved Executive
Share Option Plans, the Innogy Holdings
Sharesave Plans, the Innogy Holdings
Profit Sharing Plan, the Innogy Holdings
Company Share Option Plan, the Innogy
Holdings Management Share Option Plan
and the Innogy Holdings Long Term
Incentive Plan
"Innogy Shareholders" holders of Innogy Shares
"Innogy Sharesave Plans" the Innogy Holdings Unapproved SAYEPlan
and the Innogy Holdings Sharesave Plan
"Innogy Shares" ordinary shares of 10 pence each in
Innogy
"KPMG" KPMG Audit plc
"Letter of Transmittal" in relation to Innogy ADSs, the letter
of transmittal relating to the Offer
which is being sent with the Offer
Document for use by holders of Innogy
ADSs wishing to accept the Offer
"Loan Notes" the unsecured loan notes which may be
issued by the Offeror pursuant to the
Loan Note Alternative, having the rights
and being subject to the restrictions to
be set out in the Loan Note Instrument
"Loan Note Alternative" the right of Innogy Shareholders (other
than certain overseas shareholders) who
validly elect to receive Loan Notes
instead of all or part of the cash to
which they would otherwise have been
entitled under the Offer
"Loan Note Instrument" the loan note instrument constituting
the Loan Notes, the terms of which are
summarised in Appendix II to this
document (and any instruments
supplemental thereto)
"London Stock Exchange" London Stock Exchange plc
"LTIP" Innogy long term incentive plan
"member account ID" the identification code or number
attached to any member account in CREST
"Merrill Lynch" Merrill Lynch International
"NETA" New Electricity Trading Arrangements
"New York Stock Exchange" or "NYSE" New York Stock Exchange, Inc.
"Noteholder" a holder of Loan Notes
"Notice of Guaranteed Delivery" the notice of guaranteed delivery
relating to the Offer for use by holders
of Innogy ADSs
"Offer" the recommended offer to be made by the
Offeror and (outside the US) by Merrill
Lynch on its behalf to acquire all of
the issued and to be issued Innogy
Shares, including (as appropriate) the
offer to acquire Innogy ADSs, on the
terms and subject to the Conditions set
out in the Offer Document and including
where the context permits, any
subsequent revision, variation,
extension or renewal of such Offer
"Offer Document" this document and any other document
containing the Offer
"Offer Period" the period commencing on 17 February
2002 until whichever of the following
dates shall be the later of (a) 3.00
p.m. (London time) on 26 April 2002 and
(b) the earlier of (i) the time at which
the Offer lapses and (ii) the time at
which the Offer becomes unconditional
"Offer Price" 275 pence for each Innogy Share and
2,750 pence for each Innogy ADS
"Offeror" GBV Funfte Gesellschaft fur
Beteiligungsverwaltung mbH, a
wholly-owned subsidiary of RWE
"Official List" the Official List of the UK Listing
Authority
114
"Panel" the Panel on Takeovers and Mergers
"participant ID" the identification code or membership
number used in CREST to identify a CREST
member or other CREST participant
"pounds sterling," "(pound)" or "pence" the lawful currency of the United
Kingdom
"PwC" PricewaterhouseCoopers
"Receiving Agent" Lloyds TSBRegistrars, Antholin House, 71
Queen Street, London EC4N 1SL
"Registrar" Lloyds TSBRegistrars, The Causeway,
Worthing, West Sussex, BN99 6DA
"Regulations" the Uncertificated Securities
Regulations 2001 (SI 2001 No. 3755)
"RWE" RWE AG
"RWE Group" RWE and its subsidiary undertakings and,
where the context admits, each of them
"SEC" the United States Securities and
Exchange Commission
"subsidiary", "subsidiary undertaking", shall be construed in accordance with
"associated undertaking" or the Companies Act (but for this purpose
"undertaking" ignoring paragraph 20(1)(b) of Schedule
4A thereof)
"Subsequent Offer Period" the period commencing immediately after
the end of the Initial Offer Period
during which the Offer will remain open
for acceptance
"TTE Instruction" a transfer to escrow instruction (as
defined by the CREST Manual issued by
CRESTCo)
"Thames Water" Thames Water Plc
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
"uncertified" or "uncertified form" in relation to a share or other
security, a share or other security
title to which is recorded in the
relevant register of the share or
security as being held in uncertificated
form in CREST, and title to which, by
virtue of the Regulations, may be
transferred by means of CREST
"United States" or "US" the United States of America, its
territories and possessions, any State
of the United States of America and the
District of Columbia and all other areas
subject to its jurisdiction
"US business day" any day, other than Saturday, Sunday or
a federal holiday in the United States,
and consisting of the time period from
12.01 a.m. to 12.00 midnight Eastern
(US) time
"US dollar" or "US$" the lawful currency of the United States
"US Holder" a holder of Innogy Securities that is
(a) an individual who is a citizen or
resident of the United States, (b) a
corporation or other entity taxable as a
corporation created or organised in or
under the laws of the United States or
any political subdivision thereof, (c)
an estate, the income of which is
subject to US federal income taxation
regardless of its source or (d) a trust,
if (i) a court within the United States
is able to exercise primary supervision
over its administration and (ii) one or
more US persons have the authority to
control all substantial decisions of the
trust; if a partnership holds Innogy
Securities, the US tax-treatment of a
partner will generally depend upon the
status of partners and upon the
activities of the partnership
"US person" a US person as defined in Regulation S
under the US Securities Act
"US Securities Act" the US Securities Act of 1933 (as
amended) and the rules and regulations
promulgated thereunder
115
TO ACCEPT THE OFFER:
1. Complete the hForm of Acceptance in accordance with paragraph 13 of the
letter from Merrill Lynch contained on page 16 of this document. A
step-by-step guide to completing the Form of Acceptance has been sent to
you with this document.
2. Return as soon as possible the completed Form of Acceptance (along with any
appropriate documents of title, such as your share certificate) using the
enclosed reply-paid envelope.
If you require help contact the Helpline on:
0845 300 2527 in the UK*
866 867 1144 in the US or
+44 20 7335 7287 elsewhere
Acceptances of the Offer must be received by 3.00 p.m. (London time) on 26 April
2002.
IF YOU ARE A HOLDER OF INNOGY ADSs, TO ACCEPT THE OFFER:
1. Complete the Letter of Transmittal in accordance with paragraph 13(c) of
the letter from Merrill Lynch.
2. Return as soon as possible the completed Letter of Transmittal (along with
any appropriate documents of title, such as your Innogy ADRs) to the
Depositary, using the enclosed reply-paid envelope.
* Calls charged at local rate.
116