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100mill upfrontPaterson Ord Minnett analyst Robert Gee said.
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Date Posted: 13/01/03 9:45:32am
November the 15th--around that time Cubic's holding appeal ran out.
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http://www.erg.com.au/invst_relations/reports/annrept/2001_financials.pdf
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The acquisition costs of the business purchased from Motorola have been capitalised, reversing the earlier indication that the costs would be written off. This has been done on the basis that the recoverable amount exceeds the acquisition costs and there is no justification for writing the asset down, particularly given the recent confirmation that the consolidated entity, through Integrated Transit Solutions Ltd (ITS), has been chosen as the preferred proponent for the Sydney Integrated Ticketing System (SITS) project.
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The New South Wales Government and ITS will now negotiate the final contract terms with a final contract scheduled by 31 December 2001. Under the draft contract, ITS will supply equipment and software for the Sydney system. In addition, the New South Wales Department of Transport is to outsource the operation of the Sydney system to ITS for ten years.
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http://www.dialinfolink.com.au/articles/7a/0c010c7a.asp
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ERG said it was hopeful that signing supply and long-term operating contracts in Sydney and Seattle - which had been delayed by as much as two to three years - would be finalised during the coming months.
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ERG said it was the preferred proponent in both cases, where the infrastructure equipment was being acquired by the customer and its operation outsourced to ERG.
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http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=5403161%20%20&tableid=1
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http://www.thewest.com.au/20020727/business/tw-business-home-sto65702.html
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ERG wins $500m joust, rival blasted By John Phaceas
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BALCATTA-BASED smart card developer ERG won a crucial battle in its bid to regain market confidence yesterday when the New South Wales Supreme Court ruled in its favour against its US ticketing rival Cubic Transportation Systems.
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The court attacked as "reprehensible" and "dishonest" attempts by Cubic to overturn the awarding of a $500 million ticketing contract in Sydney.
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Justice Michael Adams accused the Cubic-led Smartpos consortium, which includes the Commonwealth Bank, of "positive dishonesty" in arguing the NSW State Government had brought "improper influence" to bear in naming ERG-controlled Integrated Transport Systems group its preferred tenderer last August.
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News of the ruling sparked frenzied buying of ERG shares, with more than 24 million changing hands for the day. The stock rose as much as 8.7 per cent to 31¢ before closing unchanged at 28.5¢, but remains well below the $1.06 attained in August when ITS was first named preferred bidder.
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Analysts were cautiously optimistic about the implications for ERG, given the 12 to 18-month lead-time the company faces before receiving any significant material benefit from the contract.
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"It's worth $100 million upfront and it is their first major city contract for a couple of years," Paterson Ord Minnett analyst Robert Gee said. "So I'd say it's certainly seen as a positive."
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Cubic's legal wrangling led to an injunction being imposed preventing the Government from finalising a contract with the ITS consortium pending a final ruling. ERG's tender subsequently expired in March.
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But throwing out Cubic's case yesterday, Justice Adams said Smartpos had been underhanded in its quest to discredit the ITS tender, given documents revealing it had sought to "lay a very delicate ambush for ERG" in a bid to "kill the tender" after improperly obtaining information indicating ITS was likely to win the contract.
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Forcing the Government to reconsider Smartpos"tender would effectively condone Smartpos"conduct, the court found.
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"There is no doubt the plaintiffs (Cubic) have been guilty of repre hensible conduct," Justice Adams said.
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"It is difficult indeed to see how the court would be justified in directing the defendants to reconsider the plaintiff's tender when its lack of good faith and positive dishonesty have been so devastatingly exposed."
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ERG managing director Peter Fogarty was in Europe and could not be reached for comment yesterday.
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But company spokesman Shaun Duffy said the company was elated at the court's decision, and was now eager to finalise its contract negotiations with the NSW Government.
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Mr Duffy would not comment on whether ERG would be required to submit a fresh tender, but industry sources said it was unlikely given that the Government had first called for tenders more than three years ago in May 1999.
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Cubic Australia managing director Glenn Maker "rejected out of hand any suggestion of impropriety" by Cubic.
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He said Cubic was seeking legal advice before deciding its next move.
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http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=5551526%20%20&tableid=1
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http://www.erg.com.au/invst_relations/reports/index.htm
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The Group is hopeful that signing of contracts in Sydney and Seattle will be finalised during the coming months. Finalisation of these contracts has been delayed by as much as 2-3 years. Both are supply and long-term operating contracts. In both cases the infrastructure equipment is being acquired by the customer and its operation outsourced to ERG. ERG is the preferred proponent in both cases.
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http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=4776511%20%20&tableid=2
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From the Australian Financial Review Feb 13 Annabel Hepworth
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In a dramatic about-face, smartcard technology company Cubic Transportation Systems yesterday abandoned allegations that senior members of the Carr Government improperly interfered in the tender process for a $100 million-plus public transport ticketing project.
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The allegations of impropriety were a central plank of Cubic's legal challenge against the Government's decision to award the contract for the overhaul of Sydney's ticketing system to a rival consortium of which ERG Ltd is the major partner.
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Cubic, which is headquartered in California, will, however, still press ahead with its attempt to prohibit the Government from entering into the contract with the successful tenderer, Integrated Transit Solutions Ltd.
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The full hearing starts next Tuesday with Transport NSW last night reaffirming its plans to vigorously fight the remaining aspects of Cubic's case.
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In the interlocutory hearing in the NSW Supreme Court yesterday, counsel for Cubic, Mr Tim Moore, pointed to comments the project manager for the ticketing deal, Mr John Armstrong, is alleged to have made about the independent evaluation committee that assessed the competing bids.
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Cubic alleges Mr Armstrong effectively said it had intended to recommend the Smartpos consortium (of which Cubic was a member) but was then instructed to favour the ITSL bid or that, regardless of the committee's recommendation, the deal was awarded to ITSL.
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Cubic now considers that statement was false and there was a deliberate attempt to deceive the company, Mr Moore said.
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Mr Armstrong's role was as a "spider" in the web of something significantly below politics, he said. The company's case is that the decision to select ITSL involved a breach of the Government's own tendering and procurement code because it was not based exclusively on the evaluation criteria.
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In other developments, Dr John Griffiths SC, for the defendants, suggested Cubic had moved away from allegations raised on Monday against the probity auditors, Deloitte Touche Tohmatsu.
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The plaintiffs claim Deloitte had misrepresented the stage reached in the evaluation process in August 2000, but were no longer saying this was intentional. This put a different "spin" on the matter, he said.
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Mr Moore responded that a file note from Deloitte was among documents found during discovery which would "speak for itself".
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However, Cubic now also claims Deloitte was in breach of its duties because it had been providing professional advice to ERG Ltd.
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Last night a Deloitte spokesperson said: "We are confident there is no conflict of interest and look forward to addressing the matter in court."
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The case was adjourned until this afternoon.
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http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=5616185
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walt12 (ID#: 108490) Why wasn't I told... 12/10/02 10:08:52 PM 5616185
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Just how grubby/competitive can the scramble for a Government tender get? Several inches of court documents that became available this week provide a pretty good guide.
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The stakes were high. The contract to provide a smartcard to replace the bus, train and ferry ticketing in NSW was worth $100 million or more.
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Contestant one was the Australian-listed ERG and its wholly-owned Integrated Transit Solutions.
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ERG already has the contract for ticketing buses and ferries in NSW.
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Contestant two was US-based Cubic Transportation Systems, the State Rail ticketing incumbent.
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When it became known that ERG was the preferred tenderer, Cubic began legal action in which it claimed that the process of determining the preferred tenderer was unfair.
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While this action by Cubic might seem fairly normal commercial behaviour, the string of documents submitted in evidence unveils a strategy which involved winning the tender as a first option but, as a second option, was aimed at making sure ERG didn't get it and the whole tender was "killed".
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Documents reveal a letter from one Cubic senior executive to another: "My view is that it is better to kill this job now than to find a way for us to be selected preferred proponent or to let ERG have it. If we are selected as preferred proponent (which I don't see as 50 per cent probable at this time) I am convinced ERG will sue the government over it. So we won't be awarded a contract anyway because it will be tied up indefinitely in litigation.
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"On the other hand the Sydney contract announcement is crucial for ERG in building up its share price ... so I'm not inclined to hand it to them. It would make them stronger and more capable of taking us on elsewhere around the world. My recommendation is that we send the hard hitting letters we have drafted to [NSW Transport Minister Carl] Scully and [director-general of transport Michael] Deegan before [tender evaluation team member John] Armstrong has the chance to sneak a recommendation through government cabinet. These will make the politicians nervous and give treasury more ammunition to try to kill the project ..."
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The Cubic consortium, which included the Commonwealth Bank, appeared to have a focus on ERG's financial situation, mentioning in one internal note that its share price had fallen by 75 per cent.
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Oddly enough, Cubic attributed that fall in market value to competition from it in Sydney and Brisbane.
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At the time in late 2001, uncertainty surrounding the Sydney contract, and the possibility it might be abandoned by the Government altogether, probably was the biggest weight on the ERG share price. This, combined with the general technology sector fallout, put additional pressure on the stock.
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Only a few months later yet another pressure emerged on ERG's share price. It announced the shock departure of its finance director and an 83 per cent slump in profit after auditors refused to approve a $31 million contribution from software sales licence fees. Cubic was covering its political bases at the same time.
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In another internal document, Cubic executives said that in keeping with its objective of blocking the awarding of the Sydney ITS contract to ERG it had "through a third person not traceable to Cubic, the State Opposition Party Transport Minister and Chief of Staff of Opposition Party Leader have been appropriately briefed on the procurement debacle. Additionally a left wing Labour [sic] Party MP has been briefed (who is not particularly friendly to the governing right wing power base of the State Labour Party) ..."
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Cubic correspondence suggests the State Rail Authority didn't consider the project a priority and wasn't paying it much attention. "They need $4 billion in capital improvements to keep the trains running on the track and this issue is occupying the time", according to this correspondence. "Through the efforts of our lobbyists I am trying to have the project killed/deferred on the basis that funds could be better spent elsewhere at the present time (as well as for reason of evaluation team 'bias' against our consortium)."
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But all this careful planning appears to have backfired this week when the judgement was finally handed down - in favour of the defendant, the NSW Government.
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The judge concluded that the point of the proceedings was, broadly speaking, to prevent the defendant from entering into a contract with ERG for the smartcards.
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He said there had been gross breaches of the plaintiff's obligations of honesty.
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ERG boss Peter Fogarty has financial issues. But right now he is talking about his legal avenues in the wake of what he describes as a two-year campaign by Cubic and the Commonwealth Bank aimed at damaging his company's reputation.
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Mark Westfield the Australian 4/9--incorrectly reporting---what judge actually stated Sydney/Cubic
The Australian 040902
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The financial results for the 2002 financial year for smartcard manufacturer ERG are due on 10 September 2002. The Australian company has already announced a $A199m write-down for the first half-year, and on 3 September its share price fell $A0.01 to $A0.225. This is a long way below the prices at which emergency roadside service provider NRMA purchased a 10 million share parcel in early 2001, between $A2.05 and $A2.30m - a paper loss of $A19m. Shareholders will be anxious to hear news about the progress of a $A500m contract bid to supply smartcards to the New South Wales public transport system. A New South Wales judge produced a court ruling in respect of ERG's right to implement the contract, against an appeal from rival firm Cubic Transportation Systems, in July 2002. The judgement was scathing in its criticism of ERG's managing director Peter Fogarty and brought his credibility into question.
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http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=5403360&tableid=1
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Smart card victory By BRUCE McDOUGALL 27jul02
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COMMUTERS moved closer to a futuristic mass-marketed smart card when the NSW Government won a major legal battle in the Supreme Court yesterday.
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The revolutionary plastic card will enable up to 1.5 million passengers to travel on trains, buses and ferries without having to buy tickets.
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A legal challenge to the tendering process brought by the unsuccessful US-based consortium Cubic was thrown out by Justice Michael Adams calling the group's behaviour "reprehensible" and "dishonest".
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Cubic sought an injunction to prevent the preferred tenderer – a consortium headed by the Western Australia-based technology group ERG – from entering into a contract with the state for the ticketing system, claiming its proposal was not fairly considered.
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But the judge, awarding costs to the government, had harsh words for the Cubic consortium, telling them: "It is difficult to see how the court would be justified in directing the defendants (the government) to reconsider the plaintiffs' tender when its lack of good faith and positive dishonesty have been so devastatingly exposed."
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Cubic, which has installed smart card technology in major cities around the world and runs State Rail's automatic ticketing system, said it was taking legal advice on its next move.
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But Australian general manager Glenn Maker said the company "rejected any suggestion of impropriety".
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ERG spokesman Shaun Duffy said the injunction preventing it from proceeding in NSW had been lifted.
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"We hope to sign a contract as soon as possible," he said.
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"It has been a long and involved process since we were originally awarded preferred proponent status in August last year and we look forward to implementing a smart card system."
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In the future it is expected people will be able to use the smart card to pay for groceries, tolls, retail goods, online shopping, phone bills and movie and concert tickets as well as transport.
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In his judgment Justice Adams found the Cubic consortium had taken advantage of highly confidential information passed to it improperly during the tender process.
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"Nothing justifies the conclusion that the [government's] decision was affected by any procedural unfairness or inappropriate actions," he said.
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The government claimed Cubic "clandestinely obtained and improperly took advantage of highly sensitive confidential information".
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Justice Adams found development risks associated with the Cubic system were assessed as significantly greater than those presented by ERG
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http://www.smh.com.au/articles/2002/10/04/1033538777462.html
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News of finance deal, US prospects give ERG a liftBy Colin KrugerOctober 5 2002
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ERG lifted its stock price from 12-month lows this week with new financing and an expanded partnership with Northrop Grumman Information Technology to pursue transit projects in the US.
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The two companies are bidding on a contract for the Washington Metropolitan Area Transit Authority and have "agreed to expand the relationship to other transport tenders", an ERG spokesman said.
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"Northrop Grumman IT brings an excellent reputation for integrity, strength and know-how in working on major complex government projects," ERG chief executive Peter Fogarty said.
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Northrop Grumman IT is a subsidiary of US defence contractor Northrop Grumman, which Mr Fogarty has previously mentioned as an ideal partner for the troubled smart card vendor.
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ERG announced a full-year $243.9 million loss last month and saw its stock price plunge.
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The shares bottomed at a 12-month low of 16c last week and closed at 18c yesterday.
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The company's cause wasn't helped with the release of Monday's annual report. It contained a directors' statement admitting "there is a significant uncertainty as to whether the parent company ... will continue as a going concern".
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A market analyst who wished to remain anonymous agreed with the verdict and said most brokers had stopped following the stock.
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"The share price is very much in the hands of day traders at the moment," he said.
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The shares got a reprieve with the announcement that ERG had secured a $30 million loan agreement with investment firm Babcock & Brown.
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The firm will advise ERG on future funding and its Australian director will join the ERG board.
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ERG is the preferred tenderer for the troubled $100 million NSW integrated ticketing program. The company was working with the Government to finalise a deal, ERG said.
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