Unit Pricing Policy
ASIC Class Order 05/26 pricing policy document
Introduction
This policy is established in compliance with section 601GAB of ASIC class order 05/26 and was approved by the Board of Babcock & Brown Power Services Limited on 30 May 2007.
What is this document about?
This document explains the policies we use in setting the issue price for securities (Stapled Securities) in Babcock & Brown Power (BBP). Our policies may change from time to time. We will make sure that you can access our latest policy.
Which funds does this document apply to?
Fund name(s) ARSN Babcock & Brown Power Trust 122 375 562
How do we price our stapled funds?
We price BBP in accordance with its constitution and as described in its disclosure documents. Generally, new Stapled Securities will be issued at a discount to the price at which existing Stapled Securities are traded on ASX.
Questions?
Please contact:
The Company Secretary
Babcock & Brown Power
Level 23, The Chifley Tower
2 Chifley Square, Sydney NSW 2000
Our Stapled Security pricing policies
When will we issue new Stapled Securities?
We will generally issue new Stapled Securities in one of the following ways:
- by making a private “placement” of new Stapled Securities to institutional investors;
- by making a pro-rata offer of new Stapled Securities to all existing Stapled Securityholders (for example an offer of 1 new Stapled Security for every 4 Stapled Securities you hold);
- by making a general offer of new Stapled Securities to the public; or
- as part of any Distribution Reinvestment Plan implemented in respect of BBP.
What price will new Stapled Securities be issued at?
New Stapled Securities will usually be issued at a discount to the ASX “market price” of existing Stapled Securities. We will always set the minimum discount to the market price which we believe will enable sufficient Stapled Securities to be issued to accomplish the objective of the offer.
“Market price” will usually be the volume weighted average trading price of Stapled Securities on ASX over a certain period.
However, in certain circumstances, the ASX trading price will not be our point of reference for determining “market price”. In particular:
- Where new Stapled Securities are to be issued pursuant to a placement to institutional investors, the “market price” will usually be set by a “bookbuild” process (see below). If we make a public offer of new Stapled Securities at the same time as this institutional placement, the bookbuild price will usually also be the market price for this public offer.
- If we think that the “market price” which would otherwise apply is not a fair representation of the market value of Stapled Securities at the relevant time, we will use an independent adviser who has the necessary qualifications and market experience to set a fair market price (see below).
What is a bookbuild?
A bookbuild is a process under which institutional investors intending to buy new Stapled Securities submit to a “bookbuild operator” (usually a merchant bank) an indicative price at which they would be willing to acquire Stapled Securities. Based on these bids, the bookbuild operator and Babcock & Brown Power Services Limited as the responsible entity for Babcock & Brown Power Trust, determine which investors will be issued with Stapled Securities and at what price.
It is similar to an auction of new Stapled Securities except that price is not the only consideration we will take into account in deciding who new Stapled Securities will be issued to. The rules we will apply are:
- Stapled Securities should be allocated to investors so as to maximise the issue price of Stapled Securities issued pursuant to the bookbuild;
- Stapled Securities should be allocated to investors so as to minimise concentration of Stapled Security holdings in the hands of one or a small number of investors; and
- Where these rules conflict, we will resolve the conflict in the best interests of BBP members as a whole.
When will we use an independent valuer to set the “market price”?
We will only use an independent valuer to set the market price of Stapled Securities if we reasonably believe that the ASX “market price” (see above) is not a true indication of the fair market value of a Stapled Security. This could occur if, for example, we believe that the volume weighted average price of a Stapled Security on ASX was determined by reference to one or more unusual trades (e.g. not on arm’s length terms).
In determining the market price, the independent valuer selects a price which it believes will:
- Enable sufficient Stapled Securities to be issued to accomplish the objectives of the offer; and
- Take into account the purpose and size of the offer, the circumstances in which the offer will be made and the interests of existing BBP members.
Reasonableness of our Stapled Security pricing policies
In setting the price for an issue of new Stapled Securities, our aim is to achieve the maximum price which will enable sufficient Stapled Securities to be issued to achieve the objectives of the offer. For example, if the objective of the offer is to fund the acquisition of a new asset, we will aim to achieve the highest price per Stapled Security possible while ensuring that sufficient acceptances are obtained to raise the funds needed to acquire the asset.
In our view, this approach is consistent with usual commercial practice for listed infrastructure trusts and is reasonable for BBP.
Documentation of exercises of discretion
On each occasion on which we set the issue price of new Stapled Securities, we will prepare and retain a document showing how the price was determined and, if such determination involved an exercise of our discretion or the discretion of an adviser, how that discretion was exercised.