| Subject: ERG has done documentationwaiting on the government to announce the contract's completion |
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January 16th
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Date Posted: 22/01/03 6:17:58pm
Posted by: lost Jan 16 2003 12:56:38:450PM
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Article on Sydney Ticketing System Contract with ERG:
ERG ticket contract still on ice
Jan 16
Mandy Bryan
A contract between ERG and the NSW Department of Transport is still on ice despite a rumour-induced trading frenzy in ERG stocks in recent days.
Sign-off of the Sydney integrated ticketing contract, which covers delivery by ERG of a new electronic ticketing system across Sydney's trains, buses and ferries, has been considered "imminent" for more than a year.
Slated to be finalised by late 2001, contract negotiations were stalled in February by litigation between rival bidder Cubic and the department over the bidding process. In addition, in March, auditor PricewaterhouseCoopers said there was "significant uncertainty" in ERG's ability to continue as a going concern.
The litigation was resolved in July and ERG is now considered to be on a firmer financial footing. PricewaterhouseCoopers has since signed an unqualified report for its 2002 financial statements.
But yesterday neither the department nor ERG was any closer to providing guidance on the deal's completion except to say it was still on track.
A Department of Transport spokesman said the department was still negotiating with ERG. "Until this is done we can't comment on timing," he said.
Paterson Ord Minnett analyst Robert Gee said the contract could be signed any day.
"ERG has said it has done all it needed to in terms of documentation. Now they are just waiting on the government to announce the contract's completion," he said.
But the announcement could still be months off, according to some analysts, who say the government may hesitate to sign off on the project just weeks before a state election.
"Ahead of an election, governments tend to go into paralysis mode," said an analyst at DJ Carmichael, Peter Strachan.
The Department of Transport took two years to announce ERG was its preferred tenderer for the project, in May 1999.
Even so, increasingly frequent rumours about the signing of the deal contributed to a share trading frenzy on Tuesday, when more than 37 million ERG shares changed hands. The closing share price was 14.5¢.
Trading volumes eased yesterday. The company's shares closed at 12.5¢ after ERG announced a spring-clean of its balance sheet in which it will pay $10 million in cash to its former partner, Motorola.
Motorola took money, rather than new capital, for its unlisted convertible note holding in the electronic ticketing company. The payout ends its financial links with its former partner.
The move also sets the scene for a broader capital restructure of the company. The restructure, soon to be explained in detail and put to shareholders, controversially proposes that control of the company should be passed to overseas institutions.
Some analysts believe there is little choice for ERG shareholders. Mr Gee said ERG needed cash to finance big ticketing projects such as Sydney's.
(Voluntary Disclosure:Position Short Term rating:Buy Long Term Rating:Buy)
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