For the year ended 30 June 2008
Note 9
Contingent liabilities
Except as discussed elsewhere in this report, MIG had the following contingent liabilities at balance date. No provisions have been raised against these items unless stated below.
(i) Warnow Tunnel
European Transport Investments (UK) Limited (ETI), a subsidiary of MIGIL, has made two separate guarantees, totalling €1.19 million ($2.33 million), in the event of a senior debt payment event of default by Warnowquerung GmbH & Co. KG, the owner of the Rostock Fixed Crossing Concession. The Group believes it is unlikely to have to make these contributions and that no provisions are necessary in the financial statements as at 30 June 2008.
This contingent commitment is backed by an on-demand guarantee, provided through a blocked account into which €1.19 million ($2.33 million) has been deposited. These funds are restricted and are not accessible.
(ii) South Bay Expressway
- The construction contractor at South Bay Expressway (SBX) is in the process of submitting claims against South Bay Expressway Limited Partnership (SBXLP), an associate of MIG. These claims are the subject of ongoing discussion and adjudication.
The consideration payable by Macquarie Infrastructure Partners, Inc (MIP) to MIG in respect of MIP’s acquisition of 50% of MIG’s interest in SBX on 15 December 2006 is subject to adjustment if contractor costs are higher than forecast or if the debt levels are different to forecast. Any adjustment shall not exceed US$27.5 million.
MIG does not believe that any provision is required against its investment in SBX in the financial statements at 30 June 2008, on the basis SBXLP is expected to defend the claims successfully.
- Macquarie Infrastructure Trust (II) has provided letters of credit totalling US$3.6 million ($3.8 million) to several agencies which have granted environmental permits for the construction of the SBX. The Group believes it unlikely that there has been or will be any violation of the relevant environmental laws which would require the letters of credit to be drawn and therefore no provisions are necessary in the financial statements as at 30 June 2008.
The letters of credit are backed by an on-demand guarantee, provided through a secured cash deposit of US$3.6 million ($3.8 million).
(iii) Conversion of Reset Convertible Notes
On 13 November 2006, Ontario Teachers’ Pension Plan Board (OTPP) exercised their right to convert all outstanding Reset Convertible Notes (ReCNs) into MIG stapled securities. At the same time, OTPP advised that it considered that MIG had not complied with the terms of the ReCNs Deed Poll in relation to the giving of notice of a Trigger Event, OTPP lodged a summons in the Supreme Court of New South Wales on 7 March 2008 alleging breach of the ReCNs Deed Poll. MIG made an ASX announcement on 10 March 2008 noting the above and indicating it intends to contest the claim. The litigation process is currently ongoing.