Ann: Metgasco to commence court action and field activities, page-80

Isaks
The reason MEL wrote down their reserves was in direct response to the NSW Government's actions. So you can argue that because the assets have been moved into a higher risk category as a result of government actions that the Government should therefore pay less in compensation. The NSW Government has caused the loss of value. It has two choices either a)let the Company go ahead and develop its assets or b)buy the assets from the company. If it doesnt want to do a) then it has to do b).

Compulsory acquisition by the State of private assets has a VERY long track record in legal precedent going all the way back to the Magna Carta. Governments (State, Federal or Local) cannot force the sale of assets to them without paying fair compensation. So the idea that the Government can just cancel the licenses is a non-starter. Shareholders will enforce their rights to just compensation all the way to the high court if we have to.

So, what is fair compensation? At a minimum it has to be what the asset has cost us. (ie Historical cost basis) - that would be $80 million. At the upper end - that has to be negotiated. But here is a little known fact. The ATO recognises a value of $0.50 per Gj for 3P gas reserves for PRRT purposes. So for MEL that would be 2055PJ * $0.50 = $1.022 billion. The Commonwealth Government recognises this level of valuation as a tax base, even if the State government does not.

It might be in the interests of MEL shareholders to have this settled by the courts and it might be in the interests of the State Government to be told by the courts what to pay MEL.