Energy World International and Energy World Corporation

I have written Ad nauseum about this company,  Energy World Corporation ( EWC) and Energy World International ( EWI) and the fact EWC is in fact the parent company of EWI, despite what many may think.

We are being told that the Office of Utilities Regulation (OUR) is about to recommend to the Energy Minister that EWI be granted the license to move unto the construction phase of the project. At this stage EWI would be required to fork up just over US$30M for a performance bond.

The overly exuberant Minister had this to say in an interview “  I will be signing, the day, the hour, the minute the OUR makes its recommendation that EWI be given a license to begin the construction phase of the project. I am willing to put my career on the line, so we can get this thing moving”.

Commonsenseja, is now asking the obvious questions and would like real answers from the OUR

1. On what basis has the OUR decided to “accept” audited financial statements from EWC vs EWI?

The OUR has stated they can accept audited financial statements from a related company or in this case a large equity partner in EWC, but that statement is fundamentally flawed and here is why.

Energy World Corporation( EWC) is the “parent” company of Energy World International ( EWI),  but their ( EWC) website  has indicated that EWI is the largest shareholder in EWC and not the other way around .

I could see if we had a contractual arrangement with EWC , we decided to take audited financial statements from the largest shareholder, which in this case would have been EWI.  In this case EWI (according to the website) is the largest shareholder in EWC . In effect what we have received  ( based on the OUR) is the audited Financial statements from a company, where EWI is majority shareholder.

If EWC is the parent company ( which is what I believe it is), then this is not a major issue, but if EWI is a completely different company not controlled by EWC then we have a different problem.

The OUR in its most recent release stated that EWI is a privately held company and so does not have audited financial statements, but will move to get that completed in short order.  The OUR has indicated it has accepted this position, but is satisfied and can now move to the next stage.

Now let’s examine EWI for a second.

EWI is controlled by Mr Elliott and owns 334.572 million shares of EWC.

EWC which is a publicly listed company is also controlled by Elliott.

EWC has 1.734 billion shares outstanding.

Mr Elliott controls over 639 shares of EWC  as Mr Ellliott.

Now recall above EWI is said to be the largest shareholder in EWC,  keep this in mind.

EWI is solely owned and controlled by Mr Elliot, who already by himself has over 639.7m shares in EWC or approx  37% of all shares.

The Muddle 

Top Ten Share Holders of EWC Shares.

Rank	Entity	# Shares	% Owned
1	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	798,259,339	46%
2	ENERGY WORLD INTERNATIONAL LTD	334,572,393	19%
3	J P MORGAN NOMINEES AUSTRALIA LIMITED	153,777,129	9%
4	CITICORP NOMINEES PTY LIMITED	83,302,689	5%
5	JP MORGAN NOMINEES AUSTRALIA LIMITED	48,193,388	3%
6	NATIONAL NOMINEES LIMITED	37,876,806	2%
7	CS FOURTH NOMINEES PTY LTD	35,342,705	2%
8	MR D’ARCY FREDERICK QUINN + MRS HEATHER JEAN	13,748,167	1%
9	MR DAVID WILLIAM MAIR + MR JOHN GORDON PHIPPS	11,010,102	1%
10	10 MR JOHN GORDON PHIPPS + MRS KATHRON ANNE	10,570,102	1%

From the above one can see that on paper HSBC Custody Nominees (Aus) Ltd is the single largest shareholder with 798,259,339  shares or 46% of shares outstanding.

The second ranked company is Energy World International Ltd, which holds 334,572,393 shares or about 19% of shares outstanding. So how is it that the website is listing EWI as the largest shareholder of EWC ? ( See  * below for explanation)

From the last financial report ending June 2013, the top 20 shareholders control 91.5 % of all share of EWC or 1,582,624,645 shares, leaving 151,142,027 unaccounted for at this point in time.

Now recall I said above Mr Elliot owns 639,740,924 shares, but looking at the top ten shareholders above, where does it indicate Mr Elliot holdings.

* Well it turns out that HSBC Custody Nominees (Aus) Ltd is holding 300,000,000 shares for Energy World International Ltd, which in effect would put EWI holdings at 634,572,393 shares or 36.6% of all shares outstanding . This leaves another 5,168,531 shares for Mr Elliot somewhere, but we can ignore that for now.

There are some further questions, which I don’t have the answer for but I hope of of the country’s leading financial analyst can help us understand the muddle.

You would notice that apart from EWI the top 7 shareholders contains the word  “Nominees “. Nominees are typically institutions holding shares on the behalf of the actual shareholder. These shares are typically purchased through a nominee (broker etc )and the nominee name appears as the registered owner of the shares instead of the actual owner.

So there are  856,752,056 shares that are held on the behalf of others, the question is who owns these additional shares ?

Let’s do some more maths here, we know Mr Elliott owns 639,740,924 out right. This includes the total shares of EWI as he owns that company outright.

639,740,924 + 856,752,056 =  1,496,492,980 .

So Mr Elliott and some “other party” ( maybe related) controls about 86.3% of all the shares of the company.

If EWC is the parent company of EWI, then the OUR is on the correct path, there are no issues here. If EWC is not the parent company of EWI and with EWI holding 36.6% of EWC, how can we therefore accept the financials from EWC as representative of the financial position of EWI if EWC has no control over EWI ?

Folks, the fact that is EWC is not being truthful and the OUR has been caught up in a trap and has no way to extricate itself.

There is no doubt in my mind that EWI is owned and controlled by EWC, who are both controlled by Mr Elliott and on this basis OUR is good to go in accepting the financial statements of the parent Company EWC.

There is still one potential issue here given the OUR position in accepting EWC claim that EWI is a private entity and not controlled by EWC.

EWC most recent statement list the following wholly own subsidiaries.

• Australian Gasfields Limited
•  Central Energy Australia Pty Ltd
•  Central Energy Power Pty Ltd
•  Central Queensland Power Pty Ltd
• Energy Equity West Kimberly Pty Ltd

Here is the real story, once again buried in EWC financial statement.

Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly owned subsidiaries listed above  are relieved from the Corporations Act 2001 requirements for preparation, audit, and lodgement of financial reports, and Directors’ report

As a condition of the Class Order, Energy World Corporation Ltd and the controlled entities subject to the Class Order entered into a deed of indemnity on 16 June 1998. The effect of the deed is that Energy World Corporation Ltd has guaranteed to pay any deficiency in the event of winding up of the controlled entity. The controlled entities have also given a similar guarantee in the event Energy World Corporation Ltd is wound up. 

Question #2 for the OUR.

If EWI is fails and has to be wounded up, will EWC be paying for “deficiency” as a result of EWI’s actions ?

Why has the OUR allowed itself to be trapped by the overly exuberant minister ?

Yeah its a long post but worth following if you can. If you cannot then I will have to try another way to make it is