(Confidential) Private Placement Memorandummeristem.com.ng/uploads/latestoffering/ENCON PRIVATE PLACEMENT... · This Private Placement Memorandum contains confidential information

ENCON PRIVATE PLACEMENT

IMPORTANT NOTICE This Private Placement Memorandum and the securities which it offers are directed solely to selected investors to whom they have been addressed and not to any person other than such selected investors or to the general public. Every selected investor to whom this has been addressed is expected to independently scrutinize the information contained in this document and evaluate the securities which it offers. If potential investors are in any doubt about the contents of this Private Placement Memorandum or the action to take, they are advised to consult their professional adviser(s) for guidance. The Directors of ENERGY COMPANY NIGERIA LIMITED individually and collectively accept responsibility for the accuracy of the information contained therein.

(Confidential) Private Placement Memorandum

Meant For Addressees Only

ENERGY COMPANY NIGERIA LIMITED.

Private Placement

of

3,333,333,334

Ordinary Shares of 50 kobo each

at

N18.00 per share

APPLICATION LIST OPENS MAY 14, 2008 APPLICATION LIST CLOSES JUNE 04, 2008

Issuing House:

This Private Placement Memorandum contains confidential information about ENERGY COMPANY NIGERIA LIMITED in connection with the Private Placement of 3,333,333,334 Ordinary Shares of 50 Kobo each (“The shares’’) at N18.00 per share (“The Placement”) in ENERGY COMPANY NIGERIA LIMITED (“The Company”) for the purpose of giving information to prospective investors in respect of the Placement described therein. The Placement shall be further described as the “ENCON Placement”

RC. 351374


IMPORTANT NOTICE This Private Placement Memorandum and the securities which it offers are directed solely to selected investors to whom they have been addressed and not to any person other than such selected investors or to the general public. Every selected investor to whom this has been addressed is expected to independently scrutinize the information contained in this document and evaluate the securities which it offers. If potential investors are in any doubt about the contents of this Private Placement Memorandum or the action to take, they are advised to consult their professional adviser(s) for guidance. The Directors of ENERGY COMPANY NIGERIA LIMITED individually and collectively accept responsibility for the accuracy of the information contained therein.

(Confidential) Private Placement Memorandum

Meant For Addressees Only


Private Placement

of

3,333,333,334

Ordinary Shares of 50 kobo each

at

N18.00 per share

APPLICATION LIST OPENS MAY 14, 2008 APPLICATION LIST CLOSES JUNE 04, 2008

Issuing House:

This Private Placement Memorandum contains confidential information about ENERGY COMPANY NIGERIA LIMITED in connection with the Private Placement of 3,333,333,334 Ordinary Shares of 50 Kobo each (“The shares’’) at N18.00 per share (“The Placement”) in ENERGY COMPANY NIGERIA LIMITED (“The Company”) for the purpose of giving information to prospective investors in respect of the Placement described therein. The Placement shall be further described as the “ENCON Placement”

RC. 351374


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TABLE OF CONTENT

1.0 IMPORTANT NOTICE .................................................................................................................... 2

2.0 KEY TERMS AND ABBREVIATIONS .............................................................................................. 3

3.0 INDICATIVE TIMETABLE .............................................................................................................. 4

4.0 CORPORATE DIRECTORY ............................................................................................................. 5

5.0 SUMMARY OF THE PRIVATE PLACEMENT .................................................................................... 6

6.0 DIRECTORS AND OTHER PARTIES TO THE PRIVATE PLACEMENT ............................................ 10

7.0 THE CHAIRMAN’S LETTER .......................................................................................................... 13

1. Outlook of the Nigerian Economy ...................................................................................................... 13 2. The Power Sector……………………………………………………. ...................................................................... 14 3. Overview of the Power Sector in Nigeria ............................................................................................ 15 4. Energy Company Nigeria Limited. ..................................................................................................... 16 5. Purpose of the Placement ................................................................................................................ 22 6. Board of Directors ........................................................................................................................... 23 7. Management Team ......................................................................................................................... 25 8. Research & Development ................................................................................................................ 29 9. Corporate Governance ..................................................................................................................... 29 10. Risks and Mitigants ......................................................................................................................... 29 11. Business Strategy and Future Plans ................................................................................................... 30

8.0 FINANCIAL FORECAST ............................................................................................................... 31

1. Letter from the Reporting Accountants .............................................................................................. 31 2. Profit Forecast for the years ending 31 December 2008, 2009, 2010, 2011, 2012 ................................. 32 3. Bases and Assumptions to the Forecast ............................................................................................. 33 4. Letter from the Issuing House .......................................................................................................... 35

9.0 THREE-YEAR FINANCIAL SUMMARY .......................................................................................... 36

1. Letter from the Reporting Accountants .............................................................................................. 36 2. Statement of Significant Accounting Policies ...................................................................................... 37 3. Adjusted Balance Sheets .................................................................................................................. 38 4. Adjusted Profit and Loss Accounts .................................................................................................... 39 5. Adjusted Cash flow Statements ........................................................................................................ 40 6. Notes to the Financial Statements ..................................................................................................... 41

10.0 STATUTORY AND GENERAL INFORMATION .............................................................................. 45 1. Incorporation and Share Capital History ............................................................................................ 45 2. Shareholding Structure .................................................................................................................... 45 3. Directors’ Beneficial Interests ........................................................................................................... 45 4. Subsidiaries and Associated Companies ............................................................................................. 46 5. Extracts from the Memorandum and Articles of Association ................................................................. 46 6. Claims and Litigation ....................................................................................................................... 48 7. Indebtedness .................................................................................................................................. 48 8. Costs and Expenses ......................................................................................................................... 48 9. Declarations ................................................................................................................................... 48 10. Material Contracts ........................................................................................................................... 49 11. Relationship between the Issuer and the Issuing House/Other Advisers ................................................ 49 12. Consents ........................................................................................................................................ 49 13. Documents Available for Inspection .................................................................................................. 50

11.0 PROCEDURE FOR APPLICATION AND ALLOTMENT ................................................................... 51

12.0 ADRRESSES OF THE ISSUING HOUSE AND PLACEMENT AGENTS ............................................ 52

13.0 APPLICATION FORM .................................................................................................................. 53

14.0 INSTRUCTIONS FOR COMPLETING THE APPLICATION FORM ................................................. 54


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1.0 IMPORTANT NOTICE

This Private Placement Memorandum contains confidential information about ENERGY COMPANY NIGERIA LIMITED and is intended mainly for the purpose of giving information to the select list of prospective investors to whom it is addressed. This document is not a prospectus and does not constitute an offer or an invitation to the public to subscribe to the securities presented herein. Subscription to the shares being offered may only be made by the prospective investors to whom investment letters have been addressed for the purpose of making an investment decision in accordance with the terms and conditions contained therein. The information contained herein may not be reproduced or used by anyone in any circumstance not authorised or in connection with an offer or solicitation other than the select group of investors to whom Placement Letters are addressed. Each of the prospective investors, to whom the Placement Letter is addressed, should make his/her own independent evaluation and determine the amount of investment in the ordinary shares he/she would like to make on the basis of such evaluation. The Directors of the Company individually and collectively accept full responsibility for the accuracy of the information contained therein and have taken all reasonable care to ensure that information contained herein are, to the best of their knowledge and belief, true and accurate in all material respects and that there are no other facts, the omission of which would make statement herein whether of fact or opinion misleading or untrue. Additional information, may be obtained through Meristem Securities Limited’s registered office at 124, Norman Williams Street, South-West Ikoyi, Lagos, Nigeria on any business day during the Placement period, provided the Issuing House possesses such information or can acquire it without unreasonable effort or expense. No application has been made or is required to be made to the Securities and Exchange Commission for the clearance of the Private Placement Memorandum or the registration of the securities listed herein. No application has been made or is required to be made to the Council of the Nigerian Stock Exchange for the admission of the shares being offered herein by way of private placement or for the existing issued share capital of ENCON. None of ENCON, Meristem Securities Limited or their officers commits itself to providing potential investors with any other information, update or corrections to this Private Placement Memorandum or any information contained herein. The receipt of this Private Placement Memorandum or any other information contained in it or supplied with it does not constitute investment advice from Meristem Securities Limited to Potential Investors. Each Potential Investor should make its own independent assessment of the merit or otherwise of applying for the securities offered herein and should obtain its own professional advice.


3

2.0 KEY TERMS AND ABBREVIATIONS

“CAC” Corporate Affairs Commission “Directors” The Directors of ENCON “DPS” Dividend Per Share, amount of the dividend apportioned to each outstanding 50 kobo share of ENCON “EBITDA” Earnings before Interest, Taxation, Depreciation and Amortisation “ENCON” or “the Issuer” or “the Company” Energy Company Nigeria Limited “EPS” Earning per Share, profit apportioned to each outstanding 50 kobo share of ENCON “FGN” Federal Government of Nigeria ”ISA” Investments & Securities Act 2007 “IPP” Independent Power Providers “Meristem” or “Issuing House” Meristem Securities Limited “MW” Mega Watt “NEPA” National Electric Power Authority “NELMCO” Nigerian Electricity Liability Management Company “NERC” Nigerian Electricity Regulatory Commission “NIPP” National Integrated Power Projects “NSE” or “The Exchange” The Nigerian Stock Exchange “Pari Passu” Equally “Parties” Professionals engaged, whose roles will ensure the success

of the Private Placement “PHCN” Power Holding Company of Nigeria “Placement Agents” Stockbroking firms authorised to receive applications

Forms/monies from investors in respect of the Placement “Placement Memo” The Private Placement Memorandum issued in respect of the

Private Placement “Registrars” Meristem Registrars Limited “SEC” or “the Commission” Securities and Exchange Commission “The Placement” Private Placement of 3,333,333,334 ordinary shares of 50

Kobo each at N18.00 per share “TPS” Thermal Power Station


4

3.0 INDICATIVE TIMETABLE

DATE ACTIVITY RESPONSIBILITY 14/05/08 Application list opens Meristem 04/06/08 Application list closes Meristem 11/06/08 Placement agents make returns Meristem 18/06/08 Allotment proposal prepared Registrars 25/06/08 Obtain Board approval for allotment Meristem/ENCON 26/06/08 Disburse net proceeds to ENCON Meristem/ Receiving Bankers 01/07/08 Return surplus/rejected application Registrars 11/07/08 Dispatch share certificates Registrars


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4.0 CORPORATE DIRECTORY

(A wholly owned subsidiary of Negris Holdings Limited) All Seasons Plaza Topaz Block (3rd Floor) 24, Lateef Jakande Road Agidingbi, Ikeja Lagos. Tel: 01-8043986 Fax: 01-4922181, 2301007 Email: [email protected] Website: www.negrisgroup.com Victoria House 35/37, Isheri Road Aguda Ogba Ikeja Lagos. Tel: 01-4920353-6, 4921435-6 Fax: 01-4922181 Email: [email protected] Website: www.negrisgroup.com

ENERGY COMPANY NIGERIA LIMITED

NEGRIS HOLDINGS LIMITED


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5.0 SUMMARY OF THE PRIVATE PLACEMENT

The following should be read in conjunction with the full text of the Private Placement Memorandum, from which it was derived. ISSUER: Energy Company Nigeria Limited. ISSUING HOUSE: Meristem Securities Limited SHARE CAPITAL:

Authorised: N5,000,000,000 made up of 10,000,000,000 Ordinary Shares of 50 Kobo each

Issued and fully paid: N2,499,958,000 made up of 4,999,916,000 Ordinary Shares of 50 Kobo each

Now being offered: N1,666,666,667.00 made up of 3,333,333,334 Ordinary Shares of 50 Kobo each

PURPOSE: Pursuant to the license granted by the FGN to ENCON to generate and distribute electricity natiowide, the Company has identified viable projects, which have been subjected to stringent and thorough evaluation/selection criteria.

ENCON’s strategic intents are to strengthen its funding capacities to

effectively execute the proposed projects and to increase its market share in the emerging power sector by cost leadership.

The net proceeds of the Private Placement (after deducting 1.5%

representing the cost of the Private Placement) will be utilized as follows:

PROPOSED PROJECTS AMOUNT PERCENTAGE OF NET PROCEEDS

ESTIMATED COMPLETION PERIOD

Expansion of Ikorodu Power Plant from 10MW to 150MW using 4 X 35MW gas turbines.

N 16.38 bn ($140 Mn)

27.72%

24 Months

Expansion of Ewekoro Power Projects from 12.50MW to 45MW using 5 X8.5MW dual fuel gas engines

N 5.85 bn ($50Mn)

9.90%

24 Months

Refinancing of term loan facility for Ikorodu Power Plant Phase 1

N 585 mn ($5 Mn)

0.99%

1 Month

Refinancing of Unilever Independent Power Project

N 702 mn ($6 Mn)

1.19%

1 Month

Construction of 100MW (3 X 35MW) gas turbine) Independent Power Project for Lekki

N 14.04 bn ($120 Mn)

23.76%

26 Months

Development of captive power projects for identified large consumers of electricity. Oil and gas freezone

N 8.19 bn ($70 Mn)

13.86%

12-18 Months


7

SUMMARY OF THE PRIVATE PLACEMENT

Investment in Temporary Power Production

N 5.35 bn ($41 Mn)

9.05%

1-12 Months

Investment in Trading of Power Plant equipment

N 5.033 bn ($41 Mn)

8.52%

6 Months

In addition to the above, a small portion, not more than 5% will be used to develop other supporting infrastructure (office building and support facilities)

N 2.97 bn ($26 Mn)

5.03%

3 Months

TOTAL N59.1 bn 100%

Other areas of interest would be FGN’s privatization of PHCN infrastructures

METHOD OF OFFER: By Private Placement UNITS OF SALE: A minimum of 50,000 Ordinary shares and in multiples of 10,000 shares

thereafter. PLACEMENT PRICE: N18.00 per share PAYMENT TERMS: In full on Application. PLACEMENT SIZE: N60,000,000,000 MARKET CAPITALISATION AT PLACEMENT PRICE (PRE-PLACEMENT): N89,998,488,000.00 MARKET CAPITALISATION AT PLACEMENT PRICE (POST- PLACEMENT): N149,998,488,000.00 UNDERWRITING: At the instance of the Company, the Placement is not underwritten. PREFERENTIAL ALLOTMENT: The Company intends to preferentially allot a maximum of 10% of the

Placement to members of staff of the Negris Group in addition to the 30% provisionally reserved for High Networth Individuals and Institutional Investors who apply for preferential allotment within the first week of the Placement. Applicants’ whose preferential applications are accepted are guaranteed the number of ordinary shares applied for and will not be subject to the allotment process.


8

SUMMARY OF THE PRIVATE PLACEMENT (Cont’d)

OPENING DATE: MAY 14, 2008 CLOSING DATE: JUNE 04, 2008 Financial Summary: (Extracted from the Reporting Accountants Report)

Year Ended

2007 N

2006 N

2005 N

Balance Sheet

Total Assets 3,709,079,000 2,634,886,000 4,328,006,000

Shareholders’ Funds 2,654,816,000 259,753,000 75,500,000

Profit & Loss Account

Turnover 726,611,000 781,225,000 659,679,000

(Loss)/Profit Before Taxation 203,707,000 154,796,000 (31,259,000)

Taxation (8,085,000) (7,679,000) (392,000)

(Loss)/Profit After Taxation 195,622,000 147,117,000 (31,651,000)

Earnings Per Share for 2007, 2006 and 2005 are 7.83kobo, 288.47kobo and (121.74) kobo respectively. Calculation of the Earnings Per Share are based on the Issued and Paid-up capital of the company as at 31 December of the respective financial year end. Forecast Placement Statistics: (Extracted from the Reporting Accountants Report)

Year Ended

2008 N’000

2009 N’000

2010 N’000

2011 N’000

2012 N’000

Gross Revenue 1,085,000 1,399,000 12,283,000 23,756,000 24,350,000

Operating Expenses (473,000) (609,000) (7,130,000) (11,608,000) (9,922,000)

EBITDA 612,000 790,000 5,153,000 12,248,000 14,428,000

Depreciation (174,000) (208,000) (1,789,000) (3,369,000) (3,369,000)

Profit Before Taxation 438,000 582,000 3,364,000 8,779,000 11,059,000

Estimated Taxation (108,000) (118,000) (382,000) (660,000) (677,000)

Profit After Taxation 330,000 464,000 2,982,000 8,119,000 10,382,000

Proposed Dividend (188,000) (275,000) (1,747,000) (3,440,000) (4,556,000)

Retained Earnings 142,000 189,000 1,235,000 4,679,000 5,826,000

Offer Statistics:

Forecast EPS (kobo) 3.96 5.57 35.78 97.42 124.59

Forecast Earnings yield at the Placement Price

0.22%

0.31%

1.99%

5.41%

6.92%

Forecast DPS(kobo) 2.25 3.30 20.96 41.28 54.67

Forecast Dividend yield at the Placement Price

0.13%

0.18%

1.16%

2.29%

3.04%

Forecast Price/Earnings ratio at the Placement Price

454

323.27

50.30

18.47

14.45

*Note: Forecast Earnings Per Share are based on the proposed post placement Paid-up share capital of 8,483,333,334 Ordinary Shares of 50 kobo each.

Year Ending 31 December

Year Ending 31 December


9

SUMMARY OF THE PRIVATE PLACEMENT (Cont’d)

CLAIMS AND LITIGATIONS: As at the date of this Placement Memorandum, the Company was not

involved in any litigation. STATUS: The Ordinary Shares now being issued will rank pari-pasu in every respect

with the existing shares of the Company. QUOTATION: The Company intends to make an application to the Council of The Nigerian

Stock Exchange for the admission to its Daily Official List of the entire outstanding shares of the Company, upon conclusion of the Placement.


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6.0 DIRECTORS AND PARTIES TO THE PRIVATE PLACEMENT

Engr. (Dr.) A. Ayoola Victoria House, 35/37 Isheri Road. Aguda-Ogba Ikeja, Lagos. Alhaji Musa Ojeifo Victoria House, 35/37, Isheri Road. Aguda-Ogba Ikeja, Lagos.

Chief G. T. Grant Victoria House, 35/37, Isheri Road. Aguda-Ogba Ikeja, Lagos.

Engr. T. I. Oji

Victoria House, 35/37, Isheri Road. Aguda-Ogba Ikeja, Lagos.

Maj. Gen. Y. Nom (Rtd)

Victoria House, 35/37, Isheri Road. Aguda-Ogba Ikeja, Lagos.

Mr. Wole Ayoola Victoria House, 35/37, Isheri Road. Aguda-Ogba Ikeja, Lagos.

Meristem Securities Limited 124, Norman Williams Street South West Ikoyi Lagos.

G. Elias & Co 6, Broad Street Lagos.

BDO Oyediran Faleye Oke & Co

Elephant Cement House ASSIBIFI Road Central Business District Alausa – Ikeja Lagos. KPMG Professional Services 22A, Gerrard Road Ikoyi Lagos.

Chairman

Directors

Issuing House

Solicitors to the Placement

Auditors

Reporting Accountants


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DIRECTORS AND PARTIES TO THE PRIVATE PLACEMENT (Cont’d)

Bancass Capital Management Limited 4th Floor, Lindev Plaza 16, Amodu Ojikutu street Off Bishop Oluwole Street Victoria Island Lagos.

Calyx Securities Limited Stock Exchange House (16th Floor) 2/4 Customs Street Lagos.

Clearview Investments Co. Limited NCR Building (6th Floor) 6, Broad Street Marina Lagos.

Cordros Capital Limited 16, Amodu Ojikutu Street Off Bishop Oluwole Street Victoria Island Lagos.

Cowry Asset Management Limited Plot 1319, Karimu Kotun Street Victoria Island Lagos.

Crownwealth Assets Management Limited Safe Trust Centre, 18, Keffi Street South-West Ikoyi Lagos. CSL Stockbrokers Limited Primrose Tower 17A, Tinubu Street Lagos.

Dynamic Portfolio Limited Dynamic House, Penthouse and 2nd Floor 20, Campbell Street Lagos.

Equity Capital Solutions Limited 2, Davies Street, Marina Lagos. Forte Asset Management Limited 58/60, Broad Street By Kakawa Street Lagos. Peninsula Asset Management & Investment Co. Limited Radmed House (2nd Floor) 1E, Ligali Ayorinde Street Victoria Island, Lagos.

Placement Agents


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DIRECTORS AND PARTIES TO THE PRIVATE PLACEMENT (Cont’d)

Reward Investments & Services Limited New Africa House (10th Floor) 31, Marina Lagos. Standard Alliance Money Limited 9, Younis Bashorun Street, Off Ajose Adeogun Street, Victoria Island, Lagos. Unex Securities & Investment Limited 3, Biaduo Street Off Keffi Street South-West Ikoyi Lagos.

Meristem Registrars Limited 305, Herbert Macaulay Road Alagomeji, Yaba Lagos.

Bank PHB Plc Plot 707, Adeola Hopewell Street Victoria Island Lagos. First Bank of Nigeria Plc Samuel Asabia House

35, Marina Lagos

First City Monument Bank Plc Primrose Tower 17A, Tinubu Street Lagos. Standard Chartered Bank Limited Plot 105B, Ajose Adeogun Street Victoria Island Lagos. Zenith Bank Plc Zenith Heights Plot 87, Ajose Adeogun Street Victoria Island Lagos.

Registrars

Receiving Bankers


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7.0 CHAIRMAN’S LETTER

Outlined below is the text of the letter received by Meristem Securities Limited from Engr. (Dr.) Abidoye Ayoola, the Chairman of ENERGY COMPANY NIGERIA LIMITED.


May 14, 2008 The Directors Meristem Securities Limited 124, Norman Williams Street Ikoyi South - West Lagos. Dear Sirs, ENERGY COMPANY NIGERIA LIMITED’S PRIVATE PLACEMENT OF 3,333,333,334 ORDINARY SHARES OF 50 KOBO EACH AT N18.00 PER SHARE

On behalf of the Directors of the Company, I am pleased to provide the following information in connection with the Private Placement of 3,333,333,334 Ordinary Shares of the Company at N18.00 per share. 7.1 OUTLOOK OF THE NIGERIAN

ECONOMY:

Nigeria, the 7th largest crude oil producer in the world and 2nd largest economy in Africa, has experienced significant and rapid economic growth over the last five years, from a GDP of US$58.4b in 2003 to US$294.8b in 2007, a CAGR of 38%. Non-oil GDP has grown by an average of 9% over the past 3 years, and is expected to continue to contribute significantly to overall GDP growth.

Further strengthened by a relatively stable socio-political environment, Nigeria received a total Foreign Direct Investment of US$9.6bn by the end of 2007 rising from US$433million which was the figure in 2003, or 26.66% of total capital flow ($36bn) to the continent in 2007. Nigeria has also experienced a stable foreign exchange market over the last three years, with Naira appreciating against other major world currencies (2005: N/$132.30, N/£266.77,

N/€203.33; and 2008: N/$116.73, N/£231.99, N/€182.51) ( source CBN website), on the back of a resurgent economy, high petroleum prices and sound fiscal discipline across all tiers of government. Inflation has also remained stable and successfully controlled within the respectable single digit band. Latest figures reveal that year-on-year consumer price index rose by 5.4% (December, 2007).

The astronomical growth of its foreign exchange reserves to US$59.7; (compared with US$32billion in 2005); the recent credit rating by Fitch and S&P of Bb, enthronement of the rule of law, and most especially, the burgeoning financial sector, have all contributed significantly to making Nigeria the next investment haven.

However, in spite of the promising outlook, power supply has been a recurring problem in Nigeria. Electricity supply has been perennially unreliable, with a population estimated to be over 150 million, and an electricity output of less than 3,000 MW, Nigeria ranks amongst the countries with the lowest electricity per capita in the world.


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CHAIRMAN’S LETTER (Cont’d)

COUNTRY POPULATION (2005)

INSTALLED CAPACITY (MW)

2004

WATTS (PER CAPITA)

UNITED STATES 298,800,637 942,178 3,153

AUSTRALIA 20,263,607 48,630 2,400

UAE 2,629,444 5,880 2,236

SINGAPORE 4,464,248 7,368 1,650

UK 60,545,458 76,187 1,258

SOUTH AFRICA 44,114,085 40,481 918

MALAYSIA 24,698,149 20,082 813

BRAZIL 201,765,543 86,505 429

EGYPT 79,917,138 17,058 213

COTE D’VOIRE 17,300,000 1,200 69

GHANA 22,825,400 1,432 63

KENYA 34,000,000 17,000 58

NIGERIA 127,700,000 5,600 44

7.2 THE POWER SECTOR:

Electricity which is one of the most widely used forms of energy in the world, is measured in units of power called Watts. Electricity is very critical to any nation’s quest for industrial development, as the success of the real sector, hence the economy in general, is dependent on an efficient and reliable power sector amongst other factors.

Electricity is a secondary energy source, as it is derived from the conversion of other sources of energy i.e. hydro power, petroleum, solar energy, wind power, gas, nuclear energy etc. These primary sources of energy can be categorised as either:

TORD PARTIES TO THE PRIVATE

Renewable Energy which effectively uses natural resources such as sunlight, wind, rain, tides and geothermal heat, which are naturally replenished (in a relatively short period of time). Renewable energy technologies range from solar power, wind power, hydroelectricity, biomass and biofuels etc.

On the other hand, energy sources (such as gas, petroleum, coal and nuclear power) are considered Non Renewable because they cannot be replenished (made again) in a short period of time.

These energy sources are major input in the production of electricity, and therefore, influence the availability, costs and prices of electricity globally.


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7.3 OVERVIEW OF THE POWER SECTOR IN NIGERIA:

Unfortunately, Nigeria has been plagued with unreliable power supply due to the inability of the state power authority, PHCN, to generate and distribute sufficient electricity to meet the growing demand for power. At present, it is estimated that less than 50% of total population have access to electricity.

This has contributed in no small measure to the underperforming real sector in Nigeria, as the costs incurred by industries in generating alternative power supply are enormous, and this invariably increases their production cost, which often times, they are unable to pass to the ultimate consumers.

7.3.1 DEMAND AND SUPPLY OF POWER IN

NIGERIA Currently, the NERC estimates demand of electricity to be 25,000MW, whilst actual power generation output in the country averages 3,000MW (installed capacity is less than 6,000 MW). It is this supply gap that ENCON is exploiting to fill.

A Presidential Committee on Accelerated Expansion of Nigeria’s Electricity Infrastructure which was inaugurated by President Musa Yar’Adua, posited in its interim report that a medium term goal of 10,000 additional megawatts by 2011 could be jointly met by the PHCN, joint ventures, the NIPP and newly licensed Independent Power Producers. It is estimated that at least 70,000MW of electricity is needed for Nigeria to be economically viable and competitive.

7.3.2 DEREGULATION OF THE POWER SECTOR

The FGN in an effort to increase electricity supply and reverse the negative trend in the power sector, in order to propel economic growth, embarked on reforms in the power sector in 2001 with the objectives of: • Meeting current prospective demand for

electricity.

• Attracting private (local and foreign) investment into the sector and divesting government interest in the sector.

• Developing a transparent regulatory framework and promoting competition.

• Enabling universal access to electricity thus promoting economic and social development.

• Developing indigenous capacity in the electricity sector.

To create a conducive atmosphere backed with legal framework, the Energy Power Sector Reform bill was signed into law in March 2005, which subsequently resulted in:

• Corporatization of NEPA as PHCN - a

holding company for the assets and liabilities of NEPA;

• Unbundling of PHCN into eighteen (18) new successor companies comprising Six (6) Generation companies, one (1) Transmission Company and eleven (11) Distribution /marketing entities;

• Establishment of a regulatory agency now called NERC;

• Development of a new competitive electricity market, and;

• Issuing operating license to corporate organizations(IPP) for generation, transmission and distribution of electricity.

7.3.3 ANALYSIS OF MARKET AND COMPETITION

7.3.3.1 Operators: The liberalization of the electricity market has created key players from the unbundled PHCN, and attracted new players into the markets. These include:

• The successor companies of PHCN i.e. six (6) generating companies, eleven (11) distribution companies and one (1) transmission company;

• NIPP – described as a “fast tracked solution to deliver new capacity” were established around the country (initially conceived as Niger Delta Power Project with seven (7) medium sized plants), and financed from excess crude oil revenue accounts, to provide immediate succour by increasing the nation’s installed power capacity:- Omoku TPS, Gbaran/Ubie TPS, Sapele TPS, Ikot Abasi TPS, Ihovbor TPS, Egbema TPS, Calabar TPS.

• IPP such as ENCON, AES, GEOMETRICS etc;


16


• Power Production Special Purpose Vehicles of oil producing companies like SPDC, Mobil, Chevron, Nigerian Agip etc;

• Providers of ancillary services; and, • The market regulators i.e. NERC and

NELMCO.

7.3.3.2 Market Segmentation: The electricity market can be segmented along its value chain as follows:

Power Generation: This is currently the most active segment of the market, causing interest from the FGN and private sector (foreign and local). The generation companies unbundled from PHCN are being primed for privatization while new power plants are being built through the NIPP, these include: Niger Delta Power Plants at Egbema, Sapele, Ikot Abassi, Gbarain/Ubie, Eyaen, Omoku, Ibom and Calabar. Other Federal Government projects are Omotosho, Papalanto, Geregu and Alaoji. Independent Power Projects by Private Companies such as ENCON, GEOMETRIC etc. at Ikorodu, Obajana, Omoku and Akwa Ibom.

Power generation licenses have also been issued to new applicants for Independent Power Production.

Transmission: The Federal Government through the Transmission Company of Nigeria (TRANSYSCO) remains the only player in power transmission market through a grid code. The Federal Government is investing massively to improve the power transmission network. Work is on going to upgrade overloaded 330KV and 132KV substations.

Distribution: The Power Reform Act of 2005 provides that electricity distribution exceeding 100KW be restricted to the eleven successor distribution companies of PHCN; who are being restructured for privatization. The federal and state governments are solely investing in this sector at present while private sector participation is minimal. ENCON has a distribution license for its Ikorodu Plant.

Trading: Trading activities in the electricity market.

Ancillary Services: Provision of ancillary services includes outsourcing of metering, billing, revenue collection and maintenance of power transmission and distribution facilities. These are being provided

at present through the existing transmission and distribution companies but as the market matures, it is expected that these ancillary services will be outsourced to private services providers with relevant expertise.

7.4 ENERGY COMPANY NIGERIA LIMITED 7.4.1 HISTORY AND NATURE OF THE

COMPANY. Negris Holdings Limited, the flagship/forerunner to ENCON, was established over two decades ago to provide comprehensive engineering services to the oil, gas, energy and industrial sectors of the Nigerian economy. Since then, Negris has grown into an integrated service provider to the energy sector, drawing upon a broad-based platform of highly experienced and multi-disciplined engineers, as well as creating an integrated network of energy solutions. The Deregulation Policy of the FGN in the energy sector was the galvanizing force behind the establishment of ENCON. It was established to undertake Negris’ Independent Power Production business in Nigeria, following the immense emerging opportunities (created by deregulation policy) in the area of power generation, supply and distribution. In 1999/2000, ENCON secured the license from the Ministry of Power and Steel, to operate as an IPP. At present ENCON is developing a portfolio of power plants to be operated as IPPs, either on a Build-Own-Operate (BOO) basis or as a Build-Own-Operate-Transfer (BOOT) plan. These plants can be built and commissioned as an “inside the fence” plant for an organization or built to serve a cluster of customers.

ENCON recently commenced the construction of a 10MW Gas Turbine Independent Power Plant in Ikorodu (Lagos State), to provide captive power to customers in the Odogunyan Industrial Estate of the area. ENCON also intends to develop large capacity plants for bulk electricity supply to the grid. The market for sale of electricity to industrial high load consumers will continue to expand in a growth economy like Nigeria’s. This is why the location of Ikorodu IPP was selected, to provide flexibility for grid and off grid connections.

With the entire energy sector as its operating environment, ENCON has identified opportunities, and is developing capabilities and resources, to


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enhance future growth throughout the West African sub-region. ENCON is positioned to be a total Energy Solutions provider in Nigeria, West Africa, and beyond.

Vision Energy Company Nigeria Limited has a vision - “To be the market leader in the electricity supply industry”. Mission To provide cost efficient and reliable power using appropriate environmentally friendly cutting-edge technology. 7.4.2 BUSINESS ACTIVITIES

ENCON is a wholly owned subsidiary of Negris Holdings Limited which specializes in the; 7.4.2.1 Provision of electricity, steam and refrigeration to companies by building any of the

following schemes for their energy needs: • Build, Own and Operate scheme (BOO) • Build, Own, Operate and Transfer scheme

(BOOT) • Acquire and Operate Scheme (A&O)

7.4.2.2 Development of Independent Power Plants such as: • Open Cycle Plant • Combined Heat and Power Plant (Co-

generation) • Combined Heat , Power and Cooling Plant

(Tri-generation) 7.4.2.3 Sales and Support of Turbines and

Reciprocating Engines.

7.4.2.4 Provision of temporary power.


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ENCON IKORODU INDEPENDENT POWER PLANT (Under Construction)

ENCON IKORODU INDEPENDENT POWER PLANT (UNDER CONSTRUCTION)

TO SUPPLY ELECTRICITY TO ODOGUNYAN INDUSTRIAL ESTATE, IKORODU, LAGOS

EWEKORO POWER PLANT (OWNED BY ENCON) SUPPLIES ELECTRICITY TO LAFARGE CEMENT WAPCO EWEKORO.


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7.4.3 KEY PROJECT INFORMATION

ENCON has been developing a portfolio of Independent Power Plants on BOO or BOOT basis, which includes the following:

Ewekoro Power Limited: – a 12.5 MW gas-fired reciprocating independent power plant, providing electricity to Lafarge Cement WAPCO Nigeria Plc’s factory in Ewekoro, Ogun State.

Ikorodu Industrial Power Limited: - a 150 MW gas turbine multi-faceted independent power plant for on-grid power supply. The first phase of 10 MW is ready for commissioning.

Ilupeju Power Limited: - a 1.32 MW gas-fired captive power plant to serve the power needs of Academy Press Plc., Ilupeju, Lagos State with construction at advanced stages.

Unipower Agbara Limited: - a 6 MW gas-fired reciprocating captive power plant to serve the power needs of the Agbara, Ogun State factory of Unilever

Plc.

Other Power Projects to be rolled out from ENCON’s stable are as follows: (i) Ikorodu Industrial Power Project Phase

2: This will be a simple cycle, gas driven, 140MW power project which will provide electricity to the national grid as well as the fast growing industrial off takers in the location. This project will be driven by 4 No gas turbines. It is also the Company’s plan to convert the plant to a combined cycle power plant in the future as one of its plans to increase output and energy efficiency.

The Company has already obtained a power generation license from the NERC. A transmission agreement has also been executed with the Transmission Company of Nigeria.

SHELL PORT HARCOURT POWER PLANT (BUILT BY NEGRIS)

SUPPLIES ELECTRICITY TO SHELL’S INDUSTRIAL AND RESIDENTIAL AREAS


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(ii) Captive Power Projects For WAPCO

LAFARGE: ENCON is currently providing electricity to Lafarge WAPCO Cement Company Plc at its Ewekoro Cement Factory. ENCON is currently bidding to provide additional power to the company through its existing power plant as well as construct two new additional plants for the company. The new power projects are:

• 45MW gas-driven reciprocating engine

plant for Ewekoro Cement Factory; • 20MW additional capacity for the existing

plant owned by ENCON which supplies power to Ewekoro Cement Factory; and,

• 45MW gas driven reciprocating engine plant for the cement factory at Sagamu, Ogun State.

(iii) Lekki Power Project:

This is a 100MW gas-driven power project that will supply electricity to high profile offtakers such as NICON/Chevron Estates, Palm Spring Estate among others. The plant shall also be interconnected with the national grid by taking advantage of the open-access structure of the system as well as providing leverage for capacity growth in the future. The plant configuration is a 3 X 35MW gas turbines on open cycle scheme.

(iv) Independent Power Project For ONNE: The Company won a bid to set up an independent power project of 140MW to be constructed in 2 phases of 70MW for Nigeria Ports Authority, Onne, Rivers State. The plant configuration is a 4 X 35MW gas turbines to be constructed on open cycle scheme. The plant, being a captive scheme, will be used as a base load facility to meet NPA’s power requirement at the Onne Oil and Gas Free Zone and other associated operations.

(v) Other Power Projects:

A number of small captive projects for industrial customers are at various stages of development with considerable prospects of financial closure and execution of offtake contracts. These projects are designed to meet individual requirements of various commercial and industrial offtakers who want dedicated power supply on an outsourced arrangement. A minimum combined capacity of 50MW is projected in the next three years.


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RIVER STATE POWER PLANT ENCON)

(Ongoing Power Project by NEGRIS)

RIVER STATE POWER PLANT

(BUILT BY NEGRIS FOR RIVERS STATE GOVERNMENT OF NIGERIA)

ONGOING POWER PROJECT


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7.5 PURPOSE OF THE PLACEMENT

The Company’s desire to raise long term equity capital is to enable it grow the business by building funding capacity for proposed power projects. Other compelling reasons for recourse to the capital market are as follows: a) Cost Leadership The cost of debt will increase the Company’s project cost and energy tariffs, thereby making it unattractive to its target market. The dominant players in the emerging power market are the upstream oil companies, Shell Petroleum Development Company SPDC (about 1000MW plant in Afam), Chevron Nigeria Plc (700MW in Egbin), Nigeria Agip Oil Company (450MW in Okpai, Rivers State) etc. These companies have huge cash reserves, at little or no cost to them. To effectively compete against these players, ENCON is exploring the capital market for equity capital and position itself for a competitive edge in the emerging power industry. 8 Construction of Mega Power Plants The key competitive advantage in the unfolding power market is the construction of big power plants as opposed to small ones being hitherto undertaken by the Company. Though small plants are quicker to develop and appropriate where there is capital limitation, its sustainability suffers from scale economies and price disadvantage in a competitive market. ENCON hereby seeks to expand the capacity of its existing plant projects and construct mega power plants for proposed projects. Power Supplies to National Grid The need to position the Company also means a shift in strategy from building captive power plants to developing medium to large power plants for national grid supply. This change in strategy is to tap or take advantage of a number of benefits or concessions that are provided by government to supplier of power to the grid, e.g. gas price concession. The grid also provides greater opportunities for capacity growth and increased market

share. The Company has identified and carried out thorough feasibility analysis on a number of power projects which have passed stringent criteria for selection. The projects to be financed with the net proceeds of the Private Placement are as follows: a. Expansion of Ikorodu Power Plant from 10MW to

150MW using 4 X 35MW gas turbines ($140 Million).

b. Expansion of Ewekoro Power Projects from 12.50MW to 45MW using dual fuel gas engines ($50Million).

c. Construction of 100 MW (3 X 35MW) gas turbine)

Independent Power Project for Lekki ($120 million) d. Development of captive power projects for identified

large consumers of electricity. e. Temporary Power Production f. Trading of Power Plant equipments An investment in a budding power development company with strong position in an emerging power market represents a vista of opportunities reminiscent to the boom in the telecommunication sector, and will provide enormous benefits in the following ways:

� Attractive return on investment:

� Capital appreciation overtime arising from

reinvestment of excess cash from yearly profitable operations.

In the first 3 years post floatation, dividends will be paid from existing power plants. The refinancing strategy is adopted to provide early return of investment to equity shareholders from funds otherwise payable to debt capital providers (banks).


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23

CHAIRMAN’S LETTER (Cont’d) 7.6 BOARD OF DIRECTORS

ENGR. THEOPHILUS IFEANYICHUKWU OJI

Engr. Theophilus Ifeanyichukwu Oji attended the prestigious Ahmadu Bello University, Zaria where he bagged a Bachelors Degree in Electrical Engineering. Upon graduation, he joined Gulf Oil Company (Nigeria) Limited now Chevron Nigeria Limited. He served the company meritoriously for over 30 years in several capacities before his voluntary retirement.

He is a veteran in the oil and gas industry and it is this extensive experience he brings to the Board of ENCON Limited as a Non-Executive Director. He has been on the Board of Negris since December 2001.

ALHAJI MUSA OJEIFO - Director/COO

Alhaji Musa Ojeifo is the President and Group Chief Operating Officer of Negris Holdings Limited. He has held many positions of responsibility in his 25 years employment in the Group. He currently oversees ENCON as Group Chief Operating Officer.

He is a Fellow of the Association of Chartered Certified Accountants, England and a Fellow of the Chartered Institute of Taxation of Nigeria and Institute of Strategic Management. He also holds MBA in Strategic Management. He studied Accountancy in Yaba College of Technology and London School of Accountancy.

Alhaji Ojeifo’s career path spans oil, gas, power, banking and finance, accounting, business development, etc. He has attended various management courses overseas including Senior Managers courses in Cranfield Business School England and Infocast Project Finance Institute Brooklyn, USA as well as local ones.

CHIEF GILBERT TEMISAN GRANT

Chief Grant is a renowned oil and gas technocrat. He was the first Nigerian Managing Director and Chief Executive of NLNG. He held numerous high profile positions in NNPC where he retired as Group Executive Director.

He holds a B.Sc Mechanical Engineering Degree from the University of Lagos which subsequently recognized him as a Distinguished Alumnus. Chief Grant consults on wide range of issues on gas development. He is in the board of many companies including Olokola Liquefied Natural Gas.

ENGR. (DR.) ABIDOYE AYOOLA - Executive Chairman

Engr. (Dr.) Abidoye Ayoola founded Negris Holdings Limited in 1980 and nurtured it to its present enviable holding structure – Negris Holdings Limited. As the Executive Chairman of Negris Holdings Limited, as well as six other wholly owned companies or subsidiaries in the group. He is also the owner/Chairman of companies such as; All Seasons Property, All Seasons Industry, etc.

Engr. Ayoola holds a BSc Mechanical Engineering and a Masters Degree in Petroleum Engineering. He is a fellow of the Nigerian Society of Engineers and Society of Petroleum Engineers. He is also a Distinguished Alumnus of the University of Lagos.

Before founding Negris Holdings Limited, he worked in Gulf Oil (now Chevron Nigeria Limited) and Solar Turbines International, USA. Engineer Ayoola is a renowned technocrat with an impressive career spanning 35 years in oil, gas, energy and industrial sectors. He is holder of the national award of Member of the Order of the Niger (MON).


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MAJOR GENERAL YUNANA NOM (rtd)

Major General Yunana Nom (rtd.) holds a Bachelors degree in Electrical Engineering and a post graduate Certificate in Power Engineering. He had a long and successful career in the Nigerian Army spanning all facets of military engineering and training, culminating in his appointment as a member of the then Armed Forces Ruling Council (AFRC) of Nigeria.

He retired voluntarily from the Nigerian Army in 1999 upon the return of the country to civilian rule. Major General Nom (rtd.) has since his retirement been involved with running a number of businesses. He was appointed to the Board of Negris Limited in December 2001.

MR. WOLE AYOOLA

Mr. Wole Ayoola is Vice President, Sales & Special Projects, Negris Holdings Limited. He holds a B.Sc. in Computer Science from University of Reading, United Kingdom, and has attended many top rated business courses including the Harvard Business School Executive Management Course on Leading a Professional Services Firm.

He has worked in the Software Development Unit of Xansa Ltd. U.K. (part of the BT Group) and as Consultant with Hummingbird Inc. of the United States. Before joining Negris in 2005, as Senior Manager, Corporate Strategy & Business Development, Mr. Ayoola served as Managing Director of Vudu Solutions Limited, a Nigerian based Enterprise Information Management Services firm.


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IRMAN’S LETTER (Cont’d) CHAIRMAN’S LETTER (Cont’d)

7.7 MANAGEMENT TEAM

KUNLE ADELAJA – General Manager, Finance & Administration

Kunle Adelaja attended the University of Ibadan, graduating with a B.Sc. Honours degree in Civil Engineering. He is also a Chartered Accountant and an Associate Member of the Nigerian Institute of Management. He is a Prince 2 Registered Engineer.

Mr. Adelaja joined Paramount Engineering and Technology Company, a subsidiary of Negris Limited in April 1996 as Manager, Finance and Administration. He was moved on to Negris Engineering Procurement & Construction Limited in January 2002 as Senior Manager, Finance and Administration. He has held various positions in the Negris Group.

GBENGA AJUMO – Snr. Manager, Engineering & Procurement

Gbenga Ajumo holds a B.Sc. Honours degree in Electrical Engineering and is a member of the Institute of Electrical and Electronics Engineers. He has attended several professional and specialized trainings such as Basic Relaying Protection, Load Flow and Short Circuit Analysis, Oil and Gas Facilities Design, Electrical Network Design, Basic Engineering Design and Engineering Project Management.

He started his working career with Negris as Facilities Engineer in 1990. Between 1990 and 2005 when he was elevated to the position of Senior Manager, he had functioned as Manager, Systems Development; Senior Engineer, Senior Manager, Engineering, in charge of Electrical and Instrument Design of Gas Recovery Plant; etc.

KUNLE SOBANWA – Snr. Manager, Business Development

Kunle Sobanwa holds both a B.SC. in Mechanical Engineering and an MBA from the University of Lagos. He has attended many professional development programmes at the Lagos Business School. He started his working career with Aden River Estate as Mill Engineer and later moved to UAC Foods, in 1985. In 1999, he joined the services of Cadbury as Engineering Services Manager from where he moved to ENCON in 2004 as Project Manager.

ALLAN SHELLEY- Manager, Project Management Allan Shelley is a graduate of the Dundee Institute of Technology, where he obtained a B.Sc. Honours degree in Instrumentation Engineering. He also attended Dundee College of Technology where he obtained the C&G AutoCAD Engineering Design V14.

Before joining Negris, he has had over twenty years qualitative working experience worldwide as Power Plant manager/Power Plant Engineer in both large and medium turbine generation installations specializing in all aspects of power station operations including commissioning, maintenance and overhaul as well as servicing and operations of power plants. Some of the internationally reputed companies that he has worked with include the Royal Airforce, MOD (Air), London; Rolls Royce/GEC Gas Turbines, Whetstone Leics, Aramco, the Steag Group Essen GMBH, and the Hyundai BTIP Projectin Bonny Island, Rivers State.


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DIPAK PAL – Manager, Engineering

Dipak Pal is a First Class graduate of Electrical Engineering from Jadavpur University, Calcutta, India.

He started his working career with Development Consultants Private Limited of Kolkata, India where he worked for 32 years and rose to become the General Manager. In pursuit of career advancement, he joined Lahmeyer Intl (India) Ltd. as Senior General Manager (Electrical) before he joined ENCON. Mr. Dipak has been involved in so many overseas professional assignments some of which include his secondment to Kuljan Corporation USA in 1999 to work for a number of gas turbine projects at GE, USA for the engineering of gas turbine MSD. He also worked under GE software environment using TIMES, PEGASUS, PROJECT NET, DART etc.

KINGSLEY FRANCIS – Snr. Manager, Project Finance/Strategy

Kingsley Francis is a graduate of the University of Lagos where he obtained both B.Sc. and Masters Degrees in Finance. He has over 20 years work experience in various organisations.

He was at Nigerian Joint Agency Limited (Agricultural Project Managers) where he started as auditor and later Strategic Auditor and Planner. He joined Joy Investment and Finance Co Ltd. between 1992 and 1995 where he rose to the position of Manager, Operations. He was the Senior Financial Analyst and Investment Adviser at Arbitrage Group (Arbitrage Consulting, Arbitrage Finance, Investment and Securities Limited) between 1997 and 1999.

He joined Standard Trust Bank Limited as Head Strategy in Jan., 2000, and rose to become Group Head, Strategy and Quality Improvement, where he helped the bank to initiate so many strategies.

SAULA OLOKODANA – Legal Adviser

Mr. Olokodana holds LLB. and LLM. degrees in Law from Obafemi Awolowo University and the University of Lagos respectively. He was called to the Nigerian Bar in 1986.

Mr. Olokodana was a Solicitor with S. A. Animashaun and Co. From there, he moved on to work with the Lagos State Government as State Counsel in the Ministry of Justice. He joined the services of Negris as Legal Officer in 1992. He was seconded from Negris to Joy Investment and Finance Company Limited as Company Secretary and Legal Adviser. He later returned to Negris in 1994 as Group Company Secretary and Legal Adviser. He was recently elevated to the position of Senior Manager with the added responsibility of overseeing Community Relations functions for the Group.

TUNDE DAWODU – Coordinator, Quality Management Systems/HSE

Engineer Tunde Dawodu holds an M.Sc. In Engineering Management from Milwaukee School of Engineering, USA, nad a B.SC. in Chemical Engineering from Illinois Institute of Technology, USA. He has attended various professional courses and training in Engineering and is a registered member of the American Institute of Chemical Engineers, Nigerian Society of Engineering Management and COREN, amongst other professional bodies. Before joining Negris, he had worked as Head, Procurement, Port Harcourt Refining Company Limited, Chemical Engineer, Nigerian National Petroleum Corporation (NNPC), Project Engineer, Polytech Inc., Milwaukee, USA, among other top-grade engineering firms.


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TUNDE ADESINA – Company Secretary

Tunde Adesina is Company Secretary, ENCON. He holds an LLB. degree in Law from the University of Ibadan and an LLM. from Queen Mary University of London. He is a Solicitor and Barrister of the Supreme Court of Nigeria and holds membership of University of London Post-Garaduate Law Society, London Shipping Law Centre and the Nigerian Bar Association. He has worked with the firms of Stephen Adesina & Co as Legal Consultant, Kayode Sofola & Co as Legal Consultant and with R.E.L. Field Marketing in Berkshire, U.K as Legal/Marketing Consultant, where he had a brief stint in 2006 before joining the services of ENCON.

KELECHI OKU-ASUQUO- Human Resources Manager Kelechi Asuquo holds a Bachelors degree in English and Law, and is also a Solicitor and barrister of the Supreme Court of Nigeria. She is a member of the Nigerian Bar Association, Associate of the Chartered Institute of Personnel management and the Nigerian Institute of Management. She has worked in so many reputable organizations amongst which are Gulf Oil, Forum Business Finance, and Forum Group of Companies where she functioned as Company Secretary and Head, Human Capital. She later joined Living Spring Energy Limited as Head, Human Resources and Operations before moving to FB Management Services Limited as Head, Management Services. Kelechi joined the Negris Group in 2005.

INNOCENT OSHOMAGBE – Manager, Energy Economics

Innocent is an Economics graduate of the University of Ibadan. He holds Masters Degrees in Banking & Finance, and Economics both from University of Lagos. He has attended so many professional and specialized training courses like Financial Modeling for Power and ISO 9001-2000 Internal Audit.

He has had over 20 years of qualitative working experience. He joined Joy Investment and Finance Company Limited in 1994 as Senior Admin Officer. He later became the Senior Credit Control /Operations Officer before he was seconded to Negris Limited in 1997 as Senior Corporate Planning Officer. In 1998, he became Assistant Manager, Admin./Human Resources in WALES (a subsidiary of Negris limited), a position he occupied before his present posting to ENCON in 2003.

DAVID OLATOKE- Manager, Plant Operations David Olatoke is a graduate of Business Administration from the University of Lagos. He also holds a Diploma in Electrical Power System Operation from NEPA (now Power Holding Company of Nigeria) Technical Training School, New Bossa and has undergone many professional training programmes. He started his working career in 1968 with the National Electric Power Authority and occupied many challenging positions of responsibility cutting across various sections of the corporation. He retired from NEPA in 1992 after which he joined the services of Negris Limited as Operations Specialist the same year. He left Negris and joined the services of McADOG and Associates in 1995 as Project Manager where he was responsible for Power Project design and csot analysis> he directly supervised many high profile Electrical projects while with McADOG which were very successful. He joined ENCON in 1999 as Project Manager responsible for Independence Power Projects.


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ADEBOWALE FOWLER- Internal Auditor Adebowale Fowler holds an MBA from the Federal University of Technology, Akure. He is a Chartered Accountant and holder of an HND degree in Accountancy from Yaba College of Technology. He has attended many professional training and development programmes and has over twenty two (22) years working experience with the Negris Group. Some of his former positions include Senior Accountant, manger, Finance and Administration, manager, Audit and Compliance, and Lead Quality Auditor, ISO: 9001:2000 QMS.

AYODELE ADEMOSU- Manager, Finance & Administration Ayodele Ademosu is a Finance & Administration Manager, ENCON. He is a Chartered Accountant and holds both Diploma and Higher national Diploma in Accountancy. He also has a Bachelors degree in Accounting from the Ambrose Alli University. Ademosu has attended many professional development courses such as ISO 9001-2000 documentation course, ISO 9001-2000 internal Audit course, Effective budgeting and budgeting control system etc. He started his working career with the firm of Onwufuju Giwa-Osagie and Co. (Chartered Accountants) as Audit Trainee. He was also with Dohagro Allied International Limited and Interworld Products Nigeria Limited before joining in 1999.


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7.8 RESEARCH AND DEVELOPMENT

The Company places a premium on Research and Development and as such has committed significant resources to this, with the primary objective of exploring ways of generating electricity, preferably through Renewable Energy technologies. This would be more efficient than the use of gas or petroleum, which supply is unreliable and expensive. Renewable Energy technologies (Solar Power, Wind Power etc) are also more environmentally friendly and usually cheaper.

7.9 CORPORATE GOVERNANCE

Corporate governance is the system by which companies are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different stakeholders in the corporation, such as, the board, managers, shareholders etc, and spells out the rules and procedures for making decisions on corporate affairs.

The Board of ENCON, which determines the general policies that govern its operation, is committed to upholding the highest standards of Corporate Governance in the Company’s operations and therefore subscribes to the Code of Best Practices on Corporate Governance in Nigeria and embraces general global best practices.

7.10 RISKS AND MITIGANTS

Operational Risks:

The Power industry in Nigeria is faced with significant challenges arising from unreliable supply of gas, which is instrumental to the generation of electricity. This leads to system losses and gross under-utilization of capacity. Mitigants: The Nigerian Government is taking a lead role in guaranteeing a reliable supply of gas and water by channeling substantial Government funding towards securing these resources to support private investment in power generation. In view of the above, ENCON will undertake execution of its project strategically in locations close to these resources. Political Risk: The operations of Independent Power Providers could be adversely affected by the uncertainties that characterize Nigeria’s political environment, especially as it pertains to

policy somersaults by the FGN. Mitigants The protracted menace of abysmally low level of power supply is one challenge that any government in power would seek to overcome, because of its significant effects on the economy. Accordingly, recent policy reforms in the power industry should be sustained by successive regimes. Furthermore, the Company would be proactive and seek to position itself favourably, ahead of any changes in the political environment. Economic Risk: The risk that the revenue generated from the Company’s projects will not be sufficient to cover operating costs and to finance maturing debt obligations. Mitigants: In selecting projects, the Company subjects various proposals to very rigorous due diligence and stringent project evaluation criteria. Furthermore, the Company has the experience and capability to implement strategies to ensure financial projections are largely met and surpassed. Sectoral / Industrial Risks: Pursuant to the deregulation of the power sector, the Company would be faced with the risk of stiff competition as more IPPs are licensed to operate. Mitigants: The huge deficit between Nigeria’s demand for electricity and the supply thereof, ensures that opportunities far outweigh combined industry capacity. ENCON, as one of the first operators to commence business, has positioned itself to be the industry leader. Specific / Company Risks:

The Company is faced with the risk of its plants / facilities becoming obsolete and increasingly inefficient, system losses occassioned by lack of skilled personnel or labour strike

Mitigants: The Company has garnered relevant experience over the years, staff undergo regular training and development, the plants are built to best international standards, usually with useful life of over 25 years;


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Environmental Risks:

Uncertainty and severity of financial and non-financial impact of environmental hazards:

Mitigants: The Company undertakes Environment Impact Analysis and employs best Environmental Risk Management techniques to ensure that the level of potential environmental liability or risk associated with its site are analyzed and an appropriate strategy is developed to mitigate the occurrence.

Currency Risks:

The Company faces the risk of fluctuation in the exchange rate between the Naira and other foreign currencies. This arises primarily because ENCON relies on the importation of its plants;

Mitigants: The CBN has resolved and succeded in keeping exchange rate stable over the past 24 months. Furthermore, the increasing size of foreign exchange reserves and persistent high prices of fuel will ensure the domestic currency does not lose value.

7.11 BUSINESS STRATEGY AND FUTURE PLANS

First Mover Advantage - ENCON being one of the first few companies to be licensed to operate in the power industry is approaching the Capital Market for long term equity finance for capacity building and to strengthen its competitive position in the emerging market for power. Existing Power Portfolio - ENCON currently has a portfolio of power plants which will be used to leverage its growth in the emerging market. Brand Appeal - The Negris group has an attractive brand equity that will provide the necessary compliments to sway investors’ choice in the market. Expansion of Power Plants - Plant capacities will be increased by investing about $140 million in the expansion of Ikorodu Power Plant from 10MW to 150MW using 4 X 35MW gas turbines and about $50 million in the Ewekoro Power Project from 12.50MW to 45MW using 5 X8.5MW dual fuel gas engines. Expansion ensures that fixed cost (and consequently, total cost) per unit reduces significantly, thus enabling ENCON to compete favourably in the sector. Diversification of Power Generation – ENCON has committed significant resources towards Research and Development, with the primary aim of diversifying Power generation (i.e. using Renewable Energy technologies) which are more efficient, and will be cheaper than current power generation.


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8. 0 FINANCIAL FORECAST

Letter from the Reporting Accountants, KPMG Professional Services

The Directors Energy Company Nigeria Limited Victoria House 35/37, Isheri Road Aguda-Ogba Ikeja Lagos 8 May 2008 Dear Sirs Report on the Profit Forecasts We have examined the accompanying profit forecasts of Energy Company Nigeria Limited (“the Company”) and its subsidiaries (jointly termed “the Group”) for the years ending 31 December 2008 to 2012 in accordance with the International Standard on Assurance Engagements (ISAE 3400) applicable to the examination of the prospective financial information. The Directors of the Company are solely responsible for the forecasts, including the assumptions set out on Pages 33 and 34 on which it is based. Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which causes us to believe that these assumptions do not provide a reasonable basis for the forecast. Furthermore, in our opinion, the forecast is properly compiled on the basis of the assumptions made by the Directors and is prepared on a basis consistent with the accounting policies normally adopted by the Company. Actual results are likely to be different from the forecast since anticipated events frequently do not occur as expected and the variation may be material. We emphasise that the forecast information is not intended to, and does not, provide all the information and disclosures necessary to give a fair presentation of the results of the operations of the Company in accordance with Statement of Accounting Standards applicable in Nigeria and the Companies and Allied Matters Act of Nigeria. Yours faithfully

KPMG Professional Services 17b Gerrard Road, Ikoyi PMB 40014, Falomo Lagos, Nigeria

Telephone 234(1)463 2090-3 234(1)269 4660-4 234(1)269 6040-4 Fax 234(1)462 0704 234(1)269 1248 234(1)269 1908 Internet www.kpmg.com


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FINANCIAL FORECAST (Cont’d)

The Directors estimate that, in the absence of unforseen circumstances and based on the assumptions stated below, the Company’s income and profits for the years ending 31st December 2008 – 2012 will be as shown below:

2008 2009 2010 2011 2012 N’m N’m N’m N’m N’m

Gross Revenues 1,085 1,399 12,283 23,756 24,350 Operating Expenses (473) (609) (7,130) (11,608) (9,922) EBITDA 612 790 5,153 12,148 14,428 Depreciation (174) (208) (1,789) (3,369) (3,369) Profit Before Taxation 438 582 3,364 8,779 11,059 Estimated Taxation (108) (118) (382) (660) (677)

Profit after Taxation 330 464 2,982 8,119 10,382

Appropriation Dividends (188) (275) (1,747) (3,440) (4,556)

Retained Earnings 142 189 1,235 4,679 5,826

Forecast EPS (K) Forecast DPS (K)

3.96

2.26

5.57

3.30

35.78

20.96

97.43

41.28

124.59

54.67

31 December


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Basis of Assumptions used in the Profit Forecasts For the years ending 31 December 2008 – 2012

Basis

The profit forecasts for the years ending 31 December 2008 – 2012 have been prepared on a basis consistent with the accounting policies normally adopted by the Company. General Assumptions

a) The Company will be successful at raising the required funds of N60 billion for expansion of its

business.

b) There will be no material changes in the accounting policies currently adopted by the Company.

c) The quality of the Company’s management will be sustained during the forecast period.

d) There will be no significant changes in the Federal Government’s monetary and fiscal policies that will adversely affect the operations of the Company; neither will there be any drastic change in the political and economic environment in general, and the electric power generation sector in particular, that will adversely affect the operations of the Company.

e) Operating results will not be materially affected by industrial disputes/strikes in the country.

f) The Company will continue to enjoy the goodwill and confidence of present and future customers, and strategic partners.

g) There will be no litigation with adverse material consequence to the Company.

h) Exchange rate shall be an average of N115 per US$1.00.

i) The Company will commission its proposed power plants with ratings and annual sales as follows:

Location of Plant Start Date Plant Capacity (kW)

Availability (Hours)

Availability (%)

Ewekoro (1) Existing 12,500 7,884 90%

Ikorodu (1) June 2008 9,000 8,260 94%

Agbara June 2008 6,000 8,410 96%

Ilupeju June 2008 1,320 8,700 99%

Lekki June 2010 125,000 7,884 90%

Ikorodu (2) June 2010 140,000 7,884 90%

Shagamu June 2010 70,000 8,300 95%

Onne June 2010 68,000 7,884 90%

Ewekoro (2) June 2010 32,000 7,884 90%

j) Gross revenues will increase at a compound annual growth rate of 118%, while EBITDA margins

will be an average of 53% over the forecast period.


34

31 December


The analysis of revenues will be as follows:

2008 2009 2010 2011 2012 N’million N’million N’million N’million N’million

Ewekoro (1) 645 661 678 695 712 Ikorodu (1) 262 430 440 451 463 Agbara 143 252 258 265 271 Ilupeju 35 56 58 60 62 Lekki - - 3,130 6,417 6,577 Ikorodu (2) - - 3,060 6,273 6,430 Shagamu - - 1,930 3,956 4,055 Onne - - 1,677 3,437 3,523 Ewekoro (2) - - 1,052 2,202 2,257

Total 1,085 1,399 12,283 23,756 24,350

k) Operating expenses are projected to be an average of 47% of gross earnings over the period.

l) The Company’s operations will be financed solely by equity.

m) The various plants will operate via special purpose vehicles (SPVs) which are wholly owned by ENCON. Each SPV will enjoy a tax holiday of 5 years from commencement of operations Subsequently, taxation (comprising of income and education taxes) will be at 32% per annum.

n) Dividends payout will be 75% of distributable profits in 2008, 2009 and 2010; and 50% of distributable profits in 2011 and 2012.

Other Assumptions a) Equipment for the plants are selected based on certain considerations, including the most

appropriate or suitable technology, customer load profile and/or base load requirement, energy, cost efficiency and environmental standards.

b) Routine and preventive maintainance of plants will be performed by the Original Equipment Manufacturers (“OEM”) in order to ensure efficiency of operations.

c) Construction periods for small (<50MW) and medium (50 – 150MW) plants are 18 months and 24 months respectively.

d) There will be no import duties (zero-rated) on gas equipment.

e) Electricity tariffs will comprise a fixed capacity charge and a variable energy charge.

f) The off-take contract duration assumed for tariff computation is 15 years.

g) ENCON will earn management fees of 7.5% of gross revenues from each plant.

h) Periodic cashflow surpluses will be reinvested in the business for such purposes as expanding existing plants, setting up a power plant trading business and building a corporate headquarters, all of which have not been considered in the forecasts.


35


Letter from the Issuing House, Meristem Securities Limited, on the profit forecast

May 14, 2008

The Directors Energy Company Nigeria Limited All Seasons Plaza Topaz Block (3rd Floor) 24, Lateef Jakande Road Agidingbi, Ikeja Lagos Dear Sirs

RE: ENERGY COMPANY NIGERIA LIMITED’S PRIVATE PLACEMENT OF 3,333,333,334 ORDINARY SHARES OF 50 KOBO EACH AT N18.00 PER SHARE

We write further to the Placement Memorandum issued in respect of the Private Placement of 3,333,333,334 Ordinary Shares of 50 kobo each in Energy Company Nigeria Limited. The Placement Memorandum contains forecasts of the profits of the Company for each of the five years ending 31st December, 2008, 2009, 2010, 2011 and 2012 respectively.

We have discussed with you and with Messrs KPMG Professional Services, the Reporting Accountants, the bases and assumptions upon which the forecasts were made. We have also considered the letter dated May 8 2008 from the Reporting Accountants regarding the accounting bases and calculations upon which the forecasts were compiled.

Having considered the assumptions made by you, as well as the accounting bases and calculations reviewed by the Reporting Accountants, we consider that the forecasts (for which you as Directors are solely responsible) have been made by you after due and careful enquiry.

Yours faithfully, FOR AND ON BEHALF OF THE ISSUING HOUSE

WOLE ABEGUNDE MANAGING DIRECTOR


36

9. 0 THREE-YEAR FINANCIAL SUMMARY

Letter from the Reporting Accountants

The Directors Energy Company Nigeria Limited Victoria House 35/37, Isheri Road, Aguda-Ogba Ikeja, Lagos

8 May 2008

Dear Sirs

We have examined the three-year financial information of Energy Company Nigeria Limited (“the Company”) and its subsidiary, Ewekoro Power Limited (jointly termed “the Group”) as set out in our report.

The financial information is based on the audited financial statements of the Group for the three financial years ended 31 December 2005, 2006 and 2007 and has been prepared in accordance with the accounting policies set out on Page 37.

The financial statements, which have been prepared under the historic cost convention, were reported upon by Messrs BDO Oyediran Faleye Oke & Co.

The audit reports for the three years ended 31 December 2005, 2006 and 2007 were unqualified.

The financial statements on which the financial information is based are the responsibility of the Directors of the Company who approve their issue. Our responsibility is to issue a report on the financial information based on our review. The Directors of the Company are also responsible for the contents of the Memorandum in which this report is included.

Our review was conducted in accordance with the International Standard on Review Engagements (ISRE 2400). This Standard requires that we plan and perform our review to obtain moderate assurance as to whether the financial statements are free from material misstatement. A review is limited primarily to inquiries of the Company’s management; analytical procedures applied to the financial data and a review of evidence obtained by the Company’s auditors on those financial statements and therefore provide less assurance than an audit. We have not performed an audit, and accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying financial information does not give a true and fair view of the state of affairs of the Company as at the balance sheet dates stated and of its profits for each of the years then ended, in accordance with Statements of Accounting Standards applicable in Nigeria and the Companies and Allied Matters Act of Nigeria.

Yours faithfully

KPMG Professional Services 17b Gerrard Road, Ikoyi PMB 40014, Falomo Lagos, Nigeria

Telephone 234(1)463 2090-3 234(1)269 4660-4 234(1)269 6040-4 Fax 234(1)462 0704 234(1)269 1248 234(1)269 1908 Internet www.kpmg.com


37

THREE-YEAR FINANCIAL SUMMARY (Cont’d)

Statement of Significant Accounting Policies The following are the significant accounting policies adopted by the Company in the preparation of its financial statements 1. Basis of preparation

The financial statements have been prepared under the historical cost convention.

2. Basis of consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Ewekoro Power Limited made up to balance sheet date.

3. Depreciation of fixed assets Depreciation is calculated to write off the cost of fixed assets on a straight line basis over the expected useful lives of each assets concerned. The principal annual rates used for this purpose are: Buildings 2.5% Plant and Machinery 7.5% Furniture and Fittings 10% Other equipment 10% Motor Vehicles 25%

Depreciation is not calculated on fixed assets until they are brought into use.

4. Debtors

Debtors are stated after deduction of balances considered doubtful of recovery.

5. Investments

Investments are stated at cost less provision of any permanent diminution in value.

6. Stocks

Stocks are stated at the lower of cost and net realisable value.

7. Rates of exchange Transactions in foreign currencies are translated into the Naira at the rates of exchange ruling at the date of the transactions. Assets and liabilities in foreign currencies are translated into Naira at the rate of exchange ruling at the balance sheet date. All profits or losses arising on conversion are included in the operating results.


38

31 December


ADJUSTED BALANCE SHEETS

2005 2005 2006 2006 2007 2007

Notes Group Company Group Company Group Company

N’000 N’000 N’000 N’000 N’000 N’000

Assets

Fixed Assets 1 2,017,220 87,367 2,223,991 439,782 2,516,409 884,439

Investments 2 1,982,370 1,994,870 2,629 2,629 611,533 2,175,180

Current Assets

Stocks 66,359 - 66,359 - 66,359 -

Debtors & Prepayments 3 221,309 73,198 210,489 94,824 190,652 52,094

Amounts due from Associated Companies 4 3,827 3,827 43,518 14,379 81,607 95,173

Cash and Bank 5 36,921 31,377 89,024 38,295 241,924 152,295

Current Assets 328,416 108,402 409,390 147,498 580,542 299,562

Less: Amounts falling due within one year

Trade & Other Creditors 6 (2,267,672) (8,416) (169,533) (18,517) (116,409) (17,435)

Due to Related Companies - - - - (26,497) (26,497)

Borrowings 7 - - (23,460) - (317,156) (288,674)

Taxation (392) - (8,071) - (16,156) (4,496)

Current Liabilities (2,268,064) (8,416) (201,064) (18,517) (476,218) (337,102)

Net Current (Liabilities)/Assets (1,939,648) 99,986 208,326 128,981 104,324 (37,540)

Less: Amounts falling due after more than one year

Borrowings (1,984,442) (1,984,442) (2,174,069) (367,908) (578,045) (578,045)

Net Assets 75,500 197,781 260,877 203,484 2,654,221 2,444,034

CAPITAL & RESERVES

Share Capital 8 26,000 26,000 51,000 51,000 2,499,958 2,499,958

Deposit for Shares 9 297,791 297,791 272,562 272,562 - -

Profit and Loss Account (248,291) (126,010) (62,685) (120,078) 154,263 (55,924)

Shareholders' Funds 75,500 197,781 260,877 203,484 2,654,221 2,444,034


31 December

39


Adjusted Profit and Loss Accounts

2005 2005 2006 2006 2007 2007

Group Company Group Company Group Company

N’000 N’000 N’000 N’000 N’000 N’000

Turnover 659,879 - 781,225 60,149 726,611 61,130

Direct Costs - - (137,184) (12,078) (149,258) (22,676)

Gross Profit 659,879 - 644,041 48,071 577,353 38,454

Administrative Expenses (555,765) (125,771) (311,210) (59,477) (341,824) (73,048)

Trading Profit/(Loss) 104,114 (125,771) 332,831 (11,406) 235,529 (34,594)

Other Income 1,247 23 41,969 17,972 123,296 106,299

Interest Payable and Similar Charges (136,620) (262) (181,515) (634) (133,792) (3,055)

(Loss)/Profit Before Taxation (31,259) (126,010) 193,285 5,932 225,033 68,650

Taxation (392) - (7,679) - (8,085) (4,496)

(Loss)/Profit after taxation (31,651) (126,010) 185,606 5,932 216,948 64,154


40


Adjusted Cash Flow Statements

2005 2005 2006 2006 2007 2007


N’000 N’000 N’000 N’000 N’000 N’000

Operating Cash Flows

Net (Loss )/Profit after Taxation (31,651) (126,010) 185,606 5,932 216,948 64,154

Adjustments:

Depreciation 154,729 6,861 148,670 4,743 167,788 3,460

Interest Expenses 136,620 262 181,515 634 133,792 3,055

Loss/(Profit) on Sale of Fixed Assets - - 197 197 (800) -

259,698 (118,887) 515,988 11,506 517,728 70,669

Changes in Working Capital

Increase in Stock (66,359) - - - - -

(Increase)/Decrease in Debtors and Prepayments (221,309) (73,198) 10,820 (21,626) 19,837 42,730

Increase/(Decrease) in Trade and Other Creditors 80,035 8,416 (2,098,139) 10,101 (53,124) (1,082)

Increase in Tax Payable 392 - 7,679 - 8,085 4,496

Increase in Amount due to Associated Companies - - - 26,497 26,497

Increase in Borrowings - 23,460 - 1,761

Increase in Amount due from Associated Companies (3,827) (3,827) (39,691) (10,552) (38,089) (80,794)

Net Operating Cash Flows 48,630 (187,496) (1,579,883) (10,571) 482,695 62,516

Investing Cash Flows

Investments (Acquired)/ Disposed (1,982,370) (1,994,870) 1,979,741 1,992,241 (608,904) (2,172,551)

Purchase of Fixed Assets (119,870) (94,228) (359,447) (361,164) (447,706) (448,117)

Proceeds from Sale of Fixed Assets - - 3,809 3,809 800 -

Net Investing Cash Flows (2,102,240) (2,089,098) 1,624,103 1,634,886 (1,055,810) (2,620,668)

Financing Cash Flows

Interest Paid (136,620) (262) (181,515) (634) (133,792) (3,055)

Increase in Share Capital 26,000 26,000 25,000 25,000 2,448,958 2,448,958

Increase/(Decrease) in Deposit for Shares 310,291 297,791 (25,229) (25,229) (285,062) (272,562)

Increase in Term Borrowings 1,984,442 1,984,442 367,908 367,908 502,072 498,811

Repayment of Bank Loans (4,722) - (178,281) (1,984,442) (1,806,161) -

Net Financing Cash Flows 2,179,391 2,307,971 7,883 (1,617,397) 726,015 2,672,152 Net increase in cash 125,781 31,377 52,103 6,918 152,900 114,000Cash at beginning of the year (88,860) - 36,921 31,377 89,024 38,295

Cash at end of the year 36,921 31,377 89,024 38,295 241,924 152,295


41

31 December


NOTES TO THE FINANCIAL STATEMENTS 1. FIXED ASSETS

The Group’s fixed assets comprise the following:

2005 2005 2006 2006 2007 2007


N’000 N’000 N’000 N’000 N’000 N’000

Cost

Land 7,910 7,910 7,910 7,910 8,210 8,210

Office Partitioning 4,999 4,999 1,912 1,912 1,912 1,912

Motor Vehicles 12,342 1,830 19,987 9,474 17,075 9,474

Office Equipment 3,951 3,951 5,039 5,039 5,431 5,431

Furniture and Fittings 2,754 2,754 4,467 4,467 4,467 4,467

Plant and Machinery 2,180,264 1,794 2,192,187 2,280 2,212,653 22,744

Construction WIP 71,561 71,561 418,049 418,049 844,991 844,991

2,283,781 94,799 2,649,551 449,131 3,094,739 897,229

Depreciation

Land - - - - - -

Office Partitioning 721 721 96 96 287 287

Motor Vehicles 11,332 1,225 12,969 2,447 7,938 4,342



Plant and Machinery 250,806 1,784 407,653 1,964 564,300 2,356

Construction WIP - - - - - -

266,561 7,432 425,560 9,349 578,330 12,790

Net Book Values

Land 7,910 7,910 7,910 7,910 8,210 8,210

Office Partitioning 4,278 4,278 1,816 1,816 1,625 1,625

Motor Vehicles 1,010 605 7,018 7,027 9,137 5,132



Plant and Machinery 1,929,458 10 1,784,534 316 1,648,353 20,388

Construction WIP 71,561 71,561 418,049 418,049 844,991 844,991

2,017,220 87,367 2,223,991 439,782 2,516,409 884,439

Construction work-in-progress comprises the costs of the ongoing development of three independent power plants.


42

31 December

31 December

31 December


2. Investments

Investments comprise: 2005 2005 2006 2006 2007 2007


N’000 N’000 N’000 N’000 N’000 N’000

Ewekoro Power Limited 1,982,370 1,994,870 - - - 1,563,647

Ikorodu Power Limited - - - - 608,904 608,904

Combustion Energy & Steel Specialist Limited - - 2,629 2,629 2,629 2,629

1,982,370 1,994,870 2,629 2,629 611,533 2,175,180

3. Debtors and Prepayments The debtors and prepayment balances are made up of the following: 2005 2005 2006 2006 2007 2007


N’000 N’000 N’000 N’000 N’000 N’000

Trade Debtors 152,398 4,604 154,584 38,919 146,117 7,559

Prepayments (Rent) 429 429 - - 6,608 6,608

Staff Debtors 422 182 - - - -

Other Debit Balances 67,983 67,983 55,905 55,905 37,927 37,927

Witholding Tax Receivable 77 - - - - -

221,309 73,198 210,489 94,824 190,652 52,094

4. Amounts due from Associated Companies The following amounts were due from associated companies

2005 2005 2006 2006 2007 2007


N’000 N’000 N’000 N’000 N’000 N’000

NEPCON 3,797 3,797 14,379 14,379 45,778 45,778

WALES - - - - 1,500 1,500

Negris Limited - - - - 34,329 -

Negris CTCs 30 30 29,139 - -

Ewekoro Power Limited - - - - - 47,895

3,827 3,827 43,518 14,379 81,607 95,173


43

31 December

31 December

31 December


5. Cash and Bank Balances

The cash and bank balances comprise the following:

2005 2006 2007

GROUP COMPANY GROUP COMPANY GROUP COMPANY N’000 N’000 N’000 N’000 N’000 N’000

Cash 106 56 253 184 338 330

Bank Balances 36,815 31,321 58,771 28,111 133,566 126,736

Short Term Deposit - - 30,000 10,000 108,020 25,229

36,921 31,377 89,024 38,295 241,924 152,295

6. Trade & Other Creditors The trade & other creditors balances are as follows:

2005 2006 2007


Trade Creditors & Accruals 39,567 14 135,537 14 94,365 465

GRN Provisions a/c 48 2,233 12,334 12,334 - -

Rolls Royce 2,187,637 - - - - -

VAT Payable 34,251 - 12,929 - 6,098 1,024

Other Creditors 6,169 6,169 8,733 6,169 15,946 15,946

2,267,672 8,416 169,533 18,517 116,409 17,435

7. Borrowings Borrowings comprise the following:

2005 2006 2007


Term Loan – SCB 1,984,442 1,984,442 1,806,161 - - -

Term Loan – Zenith - - 367,908 367,908 578,045 578,045

1,984,442 1,984,442 2,174,069 367,908 578,045 578,045


44

31 December


8. Share Capital

2005 2006 2007 N’000 N’000 N’000 Authorised Ordinary Shares of N1.00 each 200,000 200,000 5,000,000

Issued and Fully Paid: Ordinary Shares of N1.00 each 26,000 51,000 2,499,958

The increase in the Company’s issued and fully paid share capital was effected in April 2008; a resolution for the increase had however been passed by the Company’s Board of Directors in November 2007. The increase in the paid-up capital was achieved via a conversion of the existing deposit for shares.

9. Deposit for Shares Deposit for shares represents the value of various expenses incurred and borne by Negris Holdings Limited on behalf of the Company. The balance has been converted to share capital.


45

10.0 STATUTORY AND GENERAL INFORMATION

10.1 Incorporation and Share Capital History

Energy Company Nigeria Limited was incorporated in 1999, but commenced trading in 2005, as a private limited liability Company with an authorised share capital of N200,000,000 divided into 200,000,000 ordinary shares of N1.00 each and an issued and paid-up share capital of N26,000,000 divided into 26,000,000 Ordinary shares of N1 each. As at April 14, 2008, the Company had an authorized share capital of N5,000,000,000 and a paid-up capital of N2,575,000,000. The initial share capital at incorporation and subsequent changes thereon are summarised below:

Year Authorised (N) Issued (N) Consideration

Increase Cumulative Increase Cumulative

2005 200,000,000 200,000,000 26,000,000 26,000,000 Cash 2006 - 200,000,000 25,000,000 51,000,000 Cash 2007 4,800,000,000 5,000,000,000 2,524,000,000 2,575,000,000 Cash

The authorized share capital of the Company is now N5,000,000,000 divided into 10,000,000,000 ordinary shares of 50kobo each following the ordinary resolution of members to subdivide the Ordinary Shares from N1.00 each to 50 kobo each.

10.2 Shareholding Structure As at May 8, 2008, the issued ordinary share capital of the Company was N2,575,000,000 divided into

5,150,000,000 ordinary shares of N1.00 each and were beneficially held as follows:

Shareholders No of Ordinary Shares held Percentage holding

NEGRIS LIMITED 100,000,000 1.94%

Engr. (Dr.) Abidoye Ayoola 2,000,000 0.04%

NEGRIS HOLDINGS LIMITED 5,048,000,000 98.02%

5,150,000,000 100

10.3 Directors’ Beneficial Interest The direct and indirect interests of the Directors of ENCON in the issued share capital of the Company as

recorded in the register of members as at May 8, 2008, were as follows:

s/n Names of Directors Direct Holdings Indirect Holdings Total %

1 Engr. (Dr.) Abidoye Ayoola 2,000,000 5,148,000,000 5,150,000,000 100

2 Alhaji Musa Ojeifo - - - -

3 Chief Gilbert Temisan Grant - - - -

4 Engr. Theophilus I. Oji - - - -

5 Maj. Gen. Yunana Nom (rtd) - - - -

6 Mr. Wole Ayoola - - - -


46

STATUTORY AND GENERAL INFORMATION (Cont.d)

10.4 Subsidiaries and Associated Companies as at date of Memorandum 10.5 Extracts from the Memorandum and

Articles of Association of ENCON

SHARES

4. The unallotted shares shall be at the disposal of the Directors and they may allot or otherwise dispose of them on such terms and conditions complying with applicable law as they think proper.

CALLS ON SHARES

5 The Directors may from time to time make calls

upon members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times , provided that no calls shall be payable at less than one month from the day fixed for the payment of the last preceding calls and each member shall (subject to receiving at least fourteen days’ notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the Directors may determine.

TRANSFER OF SHARES

7. No transfer of any shares in the capital of the

company to any person shall be made or registered without the previous sanctions of the Directors who may, without assigning any reason decline to give such sanction, and shall so decline in the case of any transfer the registration of which would involve a contravention of Article 2.

8. The instrument of transfer of any share shall be

executed by or on behalf of the transferee and transferor, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof except that where a

person entitled to any share or debenture or any interest in any share or debenture is of unsound mind or otherwise under any disability, and by reason thereof the share, debenture or interest is vested in an Administrator, Curator or other person on behalf of the person entitled thereto, then in relation to the share, debenture or interest the person in whom it is so vested and the person entitled thereto shall be treated for the purpose of these Articles as if they were the same person.

9. Subject to such of the restrictions of these

Articles as may be applicable, any member may transfer all or any of his shares by instrument in writing in any usual or common form or any other form which the Directors may approve.

10. The Directors may in their absolute discretion and without assigning any reasons decline to register a transfer for shares (whether fully paid or not).

11. The Directors may also decline to recognize any

instrument of transfer unless: (a) A fee of 50kobo or such sum as the

Directors may from time to time require is paid to the company in respect thereof;

(b) The instrument of transfer is

accompanied by the certificate of the shares to which it relates and such other evidence as the Directors may personally require to show the right of the transfer; and,

(c) The instrument of transfer is in respect

of only one class of share. 12. If the Directors refuse to register a transfer, they

shall, within two months after the date on which the transfer was lodged with the company, send the transferee notice of the refusal.

IKORODU INDUSTRIAL POWER LIMITED

ILUPEJU POWER LIMITED

UNIPOWER AGBARA LIMITED

EWEKORO POWER LIMITED


NEGRIS HOLDINGS LIMITED LIMITED


47


14. The company shall be entitled to charge a fee not exceeding 50kobo on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of or other instruments.

15. Redeemable preference shares may be issued to

an employee of the company on such terms as the Directors may decide and such preference shares shall be redeemed at the date of retirement or termination or dismissal or end of service in any other manner, of the employee or at any other date as Directors may decide from time to time.

PROCEEDINGS AT GENERAL MEETINGS

19. No business shall be transacted at any General

Meeting unless a quorum of members is present at the time the meeting proceeds to business. Save as otherwise provided, members present in person or by proxy representing the owners at least twenty percent of the common equity capital of the company shall be a quorum.

RESOLUTION IN WRITING

20. Subject to the provisions of the Decree, a

resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at the General Meetings (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a General Meeting duly convened and held.

VOTES OF MEMBERS

21. Subject to any rights or restrictions for the time

being attached to any class or classes of shares, on a show of hands every member present in person or by proxy shall have one vote, and on a poll every member shall have one vote for each share of which he is the holder.

22. No member shall be entitled to vote at any

general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid.

23. On a poll votes may be given either personally or

by proxy. 24. The instrument appointing a proxy shall be in

writing under the hand of the appointor or his attorney duly authorised in writing, or, if the appointor is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A proxy need not be a member of the company.

25. The instrument appointing a proxy and the power

of attorney or other authority if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the office or at such other place within Nigeria as may be specified for that purpose in the notice convening the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposed to vote, or in the case of a poll, not less than 48 hours before the time appointed for taking of the poll, and in default the instrument of proxy shall not be treated as valid.

DIVIDENDS AND RESERVE

46. The Company in general meeting may declare

dividends, but no dividend shall exceed the amount recommended by the Directors.

47. The Directors may from time to time pay to the

members such interim dividends as appear to the Directors to be justified by the profits of the company.

48. No dividend shall be paid otherwise than out of

profits. 49. The Directors may, before recommending any

dividend, set aside out of the profits of the company such sums as they think proper as reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the company may be properly applied, and pending such application may at the like discretion, either be employed in the business of the company or be invested in investments, (other than shares of the company) as Directors may from time to time think fit. The Directors may also without placing the same to reserve carry forward any profit which they may think prudent not to distribute.

50. No dividend shall bear interest against the

company.


48


51. The Directors shall cause proper books of account

to be kept with respect to: (a) All sums of money received and

expended by the company and the matters in respect of which the receipt and expenditure takes place;

(b) All sales and purchase of goods by the

company; and

(c) The assets and liabilities of the company. 52. Proper books shall not be deemed to be kept if

there are not such books of account as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

53. The books of account shall be kept at the office

or, at such other place or places as the Directors think fit, and shall always be opened to the inspection of the Directors.

54. The Directors shall from time to time determine

whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be opened to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorized by the Directors or by the company in general meeting.

55. The Directors shall from time to time, in

accordance with Sections 334, 335 and 342 of the Decree cause to be prepared and to be laid before the company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those Sections.

AUDIT

56. Auditors shall be appointed and their duties

regulated in accordance with the provisions of the Decree, or any alteration thereto for the time being in force.

10.6 Claims and Litigation

There are no pending cases involving the Company. In the opinion of the Solicitors to the Placement, there are no pending cases involving the Company, which may adversely affect the Company and or the Placement. Save as

disclosed the Directors of the Company are not aware of any pending and, or, threatened litigation which may be material for the Placement.

10.7 Indebtedness: As at May 14, 2008, the Company had no outstanding debentures, mortgages, charges or similar indebtedness other than in the ordinary course of business.

10.8 Costs and Expenses

The costs, charges and expenses of and incidental to the Placement including fees payable to the professional parties’ fees, brokerage commission and printing expenses are estimated at N600 million or 1% of the gross Placement proceeds and are payable by the Company and deductible from the monies raised by the Company.

10.9 Declarations

Except as otherwise disclosed in this Memorandum:

i. No share of ENCON is under option or

agreed conditionally or unconditionally to be put under put option;

ii. No commissions, discounts, brokerages or other special terms have been granted by ENCON to any person in connection with the Placement or sale of any share of the Company;

iii. Save as disclosed herein, the directors of ENCON have not been informed of any holding representing 5% or more of the issued share capital of the Company;

iv. There are no founders’, management or

defered shares or any options outstanding in ENCON;

v. There are no material service agreements between ENCON or any of its Directors and employees other than in the ordinary course of business;

vi. There are no long term service agreements between ENCON and any of its Directors and employees other than in the ordinary course of business; and,

vii. No Director of the Company has had any interest, direct or indirect, in any property purchased or proposed to be acquired by the Company in the five years prior to the date of this Memorandum;


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It is further declared that to the best of knowledge of Directors of ENCON , as at 14th May, 2008, that none of its Shareholders, Directors and key management personnel has been involved in any of the following (whether in or outside Nigeria):

i. A petition under any bankruptcy or insolvency laws filed (and not stuck out) against such person or any partnership in which he was a partner or a Company of which he was a Director or key personnel;

ii. A conviction in a criminal proceeding or is named subject of pending criminal proceedings relating to fraud or dishonesty; and,

iii. The subject of any order, judgement or ruling of any court of competent jurisdiction or regulatory

iv. body relating to fraud or dishonesty, restraining him from acting as an investment adviser, dealer in securities, director or employee of a financial institution and engaging any type of

business practice or activity.

10.10 Material Contracts

The following contracts have been entered into and may be material to this Offer:

• A Vending Agreement dated May 14, 2008 under the terms of which the Issuing House has agreed to offer 3,333,333,334 Ordinary Shares of 50kobo each at N18.00 per share in ENCON .

Other than as stated above, the Company has not entered into any material contracts except in the ordinary course of business.

10.11 Relationship between the Issuer,

Issuing House/other Advisers As at the date of this Memorandum, there is no

relationship between ENCON and its Advisers except in the ordinary course of business.

10.12 Consents

The following have given and have not withdrawn their consents to the issue of this Private Placement Memorandum and to have their names mentioned in the form and context in which they appear therein: Directors of the Company: Engr. (Dr.) Abidoye Ayoola Alhaji Musa Ojeifo Chief Gilbert Temisan Grant Engr. Theophilus I. Oji Maj. Gen. Yunana Nom (Rtd) Mr. Wole Ayoola Company Secretary: Mr. Tunde Adesina

Issuing House: Meristem Securities Limited

Placement Agents: Bancass Capital Management Ltd Calyx Securities Limited Clearview Investments Co. Limited Cordros Capital Limited Cowry Asset Management Limited Crownwealth Assets Management Limited CSL Stockbrokers Limited Dynamic Portfolio Limited Equity Capital Solutions Limited Forte Asset Management Limited Peninsula Asset Management & Investment Co. Limited Reward Investments & Services Limited Standard Alliance Money Limited Unex Securities & Investment Limited.


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10.13 Documents Available for Inspection

Copies of the following documents may be inspected at the office of Meristem Securities Limited, 124, Norman Williams Street, South West Ikoyi, Lagos during normal business hours on any weekday (except public holidays), throughout the duration of the Private Placement. (a) The written Consents referred to above.

(b) Certificate of Incorporation of the Company.

(c) Memorandum and Articles of Association of the Company.

(d) The Information Memorandum issued in respect of the Private Placement.

(e) Shareholders’ Resolution dated 27 March 2008, authorising the Private Placement.

(f) Board Resolution dated 27 March 2008, recommending the Private Placement.

(g) The Certificate of registration of increase in share capital.

(h) The audited financial statements of the Company for each of the three years ended 31 December, 2007.

(i) The Report of KPMG Professional Services, Reporting Accountants, on the audited accounts of the Company for each of the three years ended, December 2007.

(j) The Memorandum of KPMG Professional Services, Reporting Accountants, on the Profit Forecast of the Company for each of the five years ending, December 2008, 2009, 2010, 2011 and 2012.

(k) The Material Contracts referred to above.

(l) All relevant licenses to generate and distribute electricity.

Auditors: BDO Oyediran Faleye Oke

Reporting Accountants: KPMG Professional Services

Solicitors to the Placement: G. Elias & Co

Registrars to the Placement: Meristem Registrars Limited

Receiving Bankers: Bank PHB Plc First Bank Nigeria Plc First City Monument Bank Plc

Standard Chartered Bank Ltd Zenith Bank Plc


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1.0 PROCEDURES FOR APPLICATION AND ALLOTMENT

Applications must be made through Energy Company Nigeria Limited and Meristem Securities Limited. Please adhere to the following instructions as applications which do not comply will be rejected:

(i) An application must be made on the Official Application Form.

(ii) Subscriptions for the shares will commence from Wednesday, 14 May 2008 to Wednesday 04 June

2008. Applications must be made for a minimum of 100,000 shares and 10,000 shares thereafter. The number of shares for which application is made and the full payment due in respect thereof by cheque or bank draft should be entered in the boxes provided.

(iii) Every applicant or joint applicants (as may be applicable) must write his or her full names, address and

occupation on the Application Form. An application by a corporation must bear its seal and completed under the hand(s) of a duly authorised official(s) who should state his (their) designation(s).

(iv) Each applicant should forward his/her Application Form with the cheque, certified cheque, bank draft

or evidence of money transfer for the full amount of the purchase price to Meristem Securities Limited, 124 Norman Williams Street, Ikoyi, Lagos. All cheques must be crossed and marked “ENCON Placement” and made payable to Meristem Securities Limited. All cheques and drafts will be presented upon receipt and all applications in respect of which cheques are returned unpaid will be rejected.

(v) An application from a pension or provident fund must be in the name of each individual trustee unless

the trustee is a limited liability Company.

11.1 Allotment

Energy Company Nigeria Limited reserves the right to reject any application. All irregular applications will be rejected.

11.2 Application Monies

The Issuing House will retain all application monies in a separate bank account pending the allotment of the shares. If any application is not accepted, or is accepted for fewer shares than the number applied for, the full amount or the balance of the amount paid (as the case may be) will be returned by registered mail at the applicant’s risk within one week of allotment.


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12.0 ADDRESSES OF ISSUING HOUSE AND PLACEMENT AGENTS

1. Meristem Securities Limited

124, Norman Williams Street South West Ikoyi Lagos.

2. Bancass Capital Management Ltd

4th Floor, Lindev Plaza Off Bishop, Oluwole Street Victoria Island, Lagos

3. Calyx Securities Limited Stock Exchange House (16th Floor) 2/4 Customs Street Lagos.

4. Clearview Investments Co. Limited NCR Building (6th Floor) 6, Broad Street Marina Lagos.

5. Cordros Capital Limited

16, Amodu Ojikutu Street Off Bishop Oluwole Street Victoria Island Lagos.

6. Cowry Asset Management Limited

Plot 1319, Karimu Kotun Street Victoria Island Lagos.

7. Crownwealth Assets Management Limited

Safe Trust Centre, 18, Keffi Street South-West Ikoyi Lagos.

8. CSL Stockbrokers Limited

Primrose Tower 17A, Tinubu Street Lagos.

9. Dynamic Portfolio Limited

Dynamic House, Penthouse and 2nd Floor 20, Campbell Street Lagos.

10. Equity Capital Solutions Limited 2, Davies Street, Marina Lagos.

11. Forte Asset Management Limited 58/60, Broad Street By Kakawa Street Lagos.

12. Penisula Asset Management & Investment Co. Limited Radmed House (2nd Floor) 1E, Ligali Ayorinde Street Victoria Island Lagos.

13. Reward Investments & Services Limited New Africa House (10th Floor) 31, Marina Lagos.

14. Standard Alliance Money Limited 9, Younis Bashorun Stree Off Ajose Adeogun Street Victoria Island Lagos.

15. Unex Securities & Investment Limited 3, Biaduo Street Off Keffi Street South-West Ikoyi Lagos.


PLEASE COMPLETE IN BLOCK LETTERS AND IN BLACK INK

Important Notice: Application must be made in accordance with the instructions set out on the back of this Application Form. If you are in doubt as to the action to take, please consult your Financial adviser, stockbroker, solicitor, accountant, tax consultant, bank manager or any other professional adviser for guidance. Care must be taken to follow these instructions as applications that do not comply with the instructions will be rejected.

o I am/We are 18 years of age or over.

o I/We attach the amount payable in full on application for the above number of Shares indicated in Energy Company Nigeria Limited at N=18.00 per share.

I/We agree to accept the same or any smaller number of Shares in respect of which allotment may be made upon the terms of the Placement Memorandum dated May 14, 2008 and subject to the provisions of the Memorandum and Articles of Energy Company Nigeria Limited.

I/We authorise you to send a Share Certificate and/or a cheque for any amount overpaid, by registered post to the address given below and to procure registration in my/our name as the holder(s) of such number of Shares or such smaller number, as aforesaid I/We hereby declare that I/We have read a copy of the Placement Memorandum dated May 13, 2008 issued by the Issuing House on behalf of Energy Company Nigeria Limited.

Application List Closes:

Wednesday

June 04, 2008

Application List Opens

Xxxxxxday Xxxth July, 2007

Application List Opens:

Thursday 6th September, 2007

Signature or Thumbprint Signature or Thumbprint

Stamp of Receiving Agent

Surname / Company Name

Other Names (for Individual Applicants only

Full Postal Address

Daytime Telephone Number

City State

E-mail Address

Mobile (GSM) Telephone Number

GUIDE TO APPLICATION Number of Shares applied for Amount Payable 50,000 Minimum N900,000.00 Subsequent multiples of 10,000 N180,000.00

Application List Closes: Thursday

27th September, 2008

Application List Opens:

Wednesday

May 14, 2008

Payable in full on Application Issuing House:


Private Placement of

3,333,333,334 Ordinary Shares of 50 kobo each at N18.00 per share

DECLARATION

Date Control No. (REGISTRARS’ USE ONLY)

/ / 2 0 0 8 Number of Units Applied for: Value of Shares applied for/Amount Paid:

N

1. INDIVIDUAL / CORPORATE APPLICANT Title: □ MR. □ MRS. □ MISS □ DR. OTHERS

Next of Kin

2. JOINT APPLICANT Title: □ MR. □ MRS. □ MISS □ DR. OTHERS Surname ----------------------------------------------

Other Names

Name of Bank/Branch ………………………………………………………………………………..………………….Account Number………………………………………………….………….

Company Seal/Incorporation Number (Corporate Applicants)

____________________ ________________

��PLEASE TURN OVER

RC 501757


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INSTRUCTION FOR COMPLETING THE APPLICATION FORM

Applications should be made only on the Application Form or photocopy, downloaded or scanned copy of the Application Form.

Applications must not be for less than the minimum number of shares stated on the ApplicationForm. Applications for more than the minimum number of shares must be in the multiples stated on the Application Form. The number of Ordinary Shares for which an application is made and the amount of the cheque or bank draft attached should be entered in the boxes provided. The application Form when completed should be lodged with any of the Placement Agents listed on Pages 45 - 46. Applications must be accompanied by a cheque or bank draft made payable to the Placement Agents to whom the application is submitted, for the full amount payable on application. The cheque or draft must be drawn on a bank in the same town or city in which the Placement Agents is located and crossed “ENCON PLACEMENT” with the name, address and daytime telephone number of the applicant written on the back. All bank commissions and transfer charges must be prepaid by the applicant. All cheques and drafts will be presented upon receipt and all applications in respect of which cheques are returned unpaid will be rejected and returned through the post. The applicant should make only one application, whether in his own name or in the name of a nominee. Multiple or suspected multiple applications will be rejected. Joint applicants must all sign the Application Form. An application from a group of individuals should be made in the names of those individuals with no mention of the name of the group. An application by a firm which is not registered under the Companies and Allied Matters Act 2007 should be made either in the name of the proprietor or in the names of the individual partners. In neither case should the name of the firm be mentioned. An application from a corporate body must bear the corporate body’s seal and be completed under the hand of a duly authorized official. An application by an illiterate should bear his right thumbprint on the Application Form and be witnessed by an official of the Bank or stockbroker where the application is lodged who must first have explained the meaning and effect of the Application Form to the illiterate in his own language. Above the thumb print of the illiterate, the witness must record in writing that he has given this explanation to the illiterate in a language understandable to him and that the illiterate appeared to have understood same before affixing his thumb impression. The applicant should not print his signature. If he is unable to sign in the normal manner, he should be treated for the purpose of this Offer as an illiterate and his right thumbprint should be clearly impressed on the Application Form.

APPLICATION FORM
