1. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 An A to Z of an IPO M J Hutchinson Elvet Associates Pty Ltd Australia ©Elvet Associates 2000

2. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 2

3. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 3 An A to Z of Privatisation A is for Assets B is for broker …… G is for Greenshoe …… I is for indemnity… J is for jump ball …… L is for liability …… T is for taxation… Z is for zero coupon See slide 16…

4. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 4 When the reports are written and the deal must be done... The privatisation decision is taken The sectoral restructure is done Regulation is in place An IPO is to be the process –it has only just begun… and the devil is in the detail

5. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 5 We need political commitment Permission to proceed Agreement to the objectives Promotion of the process Endorsement of progress Ownership of the outcome –But not “politicisation” of the deal

6. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 6 Plan before acting Objectives Accountability Plan & timetable Process control Execution Review Process Governance

7. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 7 Objectives Financial –eg proceeds Structural Political –Domestic equity market –Retail investors Commercial –Gearing; credit rating

8. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 8 Accountability Government standards Probity Integrity Commercial prudence –Decide who is to be accountable for what, before appointing advisers have them pitch on that basis spell it out in detailed contract form pre-pitch

9. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 9 Plan and timetable Make it up as you go along? Leave it all to the JGCs? NO! Firm clear plan –Kept under continual revision –Keep multiple options open For longer than the JGCs wish!

10. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 10 Control or Manage Management –Company advisers? Can be problematic Competitors Unions Offer size Timing Political opposition Litigation Advisers Process Quality

11. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 11 Execution E nterprise restructure Board Management Balance sheet Accounting/write off Environmental records/risks Commercial agreements Legal compliance Debt covenants? Tax Dividend policies pensions Residual interests and rights

12. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 12 Execution Advisers Small syndicates –Independent adviser in support Settle scope and contract terms in selection process –before starting work –Appoint lawyers first! Settle the accountabilities up front Align rewards and incentives with accountabilities and objectives –Challenge “customary international practice”

13. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 13 Execution Offer structure –Foreign listings/ limits Market research Advertising Retail offer Employee offer Forms of equity Offer documents –Due diligence A legal defence –Sign offs? Also a wider risk management technique Logistics

14. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 14 Execution Premarketing –Analysts –Gun jumping Initial pricing Roadshow Bookbuild Final pricing Allocation –Conflict of interest Settlement –Exchange rate risk Designations Listings Stabilisation –Greenshoe –Naked short –Share buyback

15. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 15 Review Aftermarket Objectives Cost effectiveness Public audit & inquiry Commercial progress

16. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 16 An A to Z of Privatisation A Assets; Allocation BBanker; Broker C Capital; Cash DDue diligence; Dividend EEquity F Franchise; Fees G Greenshoe; Gearing HHandover;Hedge I Indemnity; J Jump ball KKKN LLeverage; Liability M Management;Merchant bank N Naked short; NYSE O Offer document; Options PProspectus; Proposal QQualified opinion RRisk; Roadshow SSettlement; Shares TTrade sale; Tender UUnderwriter; Underwater VVoting shares WWeighting; Wall Street XeX dividend; eXchange YYield ZZero coupon

17. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 17 Elvet Associates Pty Ltd Strategic advice to industry and government Regulated industries –Communications –Transport –Infrastructure Privatization management –Public share offers –Strategic partnerships –Outsourcing State-owned enterprises –Governance –Reform –Structure Public policy for industry Integrity, probity and accountability > 35 privatisations –>A$40 billion International experience –UK, France, Australia, Turkey, Malawi, Kenya, Philippines, Indonesia and Malaysia Industry regulation

18. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 18 Elvet Associates Pty Ltd 23 Elimatta Street Reid ACT 2612 Australia Tel +61 2 6247 9480 Fax + 61 2 6230 1769 e-mail mjhutch@ozemail.com.aumjhutch@ozemail.com.au

19. Elvet Associates Pty Ltd Australia APEC-OECD Joint meeting on privatisation Bali, Indonesia 11-12 May 2000 19