quest

Please find below an open letter for consideration by the Board of Cityview Corporation.
This letter is generally released to the public for their information.
Any response given to this letter will also be made public.

Open letter to the Cityview board.

I would like to draw the Board’s attention to an asset on Cityview's register that is of significant value. If dealt with promptly, the correct treatment of this non core asset would provide an elegant solution to the company’s cash crisis problem and NEGATE the need for a rights issue.

Cityview is the holder of a 4.2% parcel of shares in the high profile Dubai based company Quest Energy Middle East Limited (“Quest”). The Board might not be aware that this asset exists.
Unfortunately, a recent CVI asset valuation by Price Waterhouse Coopers (PWC/ Caplin report) omitted this asset from its report. It would appear that your CEO did not adequately convey the existence of this asset to “PWC”. Clearly he was delinquent in this matter.

Given that CVI has recently raised over $45 Million but is currently starved of cash, and given again that your CEO has doubled the volume of shares outstanding but has left us with a stagnant level of asset growth, one could conclude that your CEO has been careless and delinquent in MANY matters.

So now you are aware that this asset exists.

Quest is the Operator of two projects in the Middle East: the Rag-e-Safid oilfield and the Fars 942 MW gas turbine power plant. In addition Quest has a number of projects under negotiation including two gas pipeline contracts in Kuwait and Nigeria and two power generation contracts at Qeshem and Mobin.

In November 2006 Quest and PTT (Petroleum Authority of Thailand) signed an agreement for the joint operatorship of the Rag-e-Safid oilfield. We have been advised that at a 10% discount rate the net present value of Quest’s share of the first stage of the project is estimated to be US$105.5 million.

Also in November 2006 the formal inauguration of the 942 MW Fars gas turbine power plant construction was enacted. This is a 50/50 joint venture between Quest and Mapna International. According to Quest, at a 10% discount rate the net present value of Quest’s share of Fars is estimated to be US$107.3 million.

Morison Menon, Dubai chartered accountants, were commissioned to value the Quest portfolio and in Mid 2006 placed a fair market value at 45-46 million euros. On a valuation of 45 million euros, Morison Menon advised that CVI’s holding of 8.3% of Quest was worth US$4.7 million.

At the time of valuation CVI held 8.3% of Quest. It currently holds 4.2%, valued at US$2.38 million. The sale of this asset is an ideal and elegant alternative to the current proposed rights issue, which would raise appx. US$3.3 Million (after costs) BUT would double again the quantity of shares outstanding.

Why double the quantity of shares outstanding for the sake of US$1 Million? Surely Pensador could return US$1 Million or more from the US$14 Million they currently refuse to return. Perhaps your Chairman could use his influence. On this matter I wonder if the Board would be willing to tell its shareholders why the US$14 Million cannot be returned and why the money was not protected from this risk. Your CEO has refused to answer these questions.

I ask that the Board very urgently consider the sale of its Quest shares and subsequently withdraw the current rights issue program, the implementation of which would decimate the company.


References
http://www.asx.com.au/asxpdf/20070122/pdf/310lkzhtl492dc.pdf
http://www.asx.com.au/asxpdf/20060727/pdf/3xq8xfyn4h8wl.pdf