Nexus Energy : Scheme Meeting Address

ASX Announcement

12 June 2014

Scheme Meeting Address

John Hartwell (Non-Executive Director)

Opening Remarks by Chairman of the Scheme Meeting

This meeting has been called pursuant to an order of the Federal Court of Australia made on 7 May 2014. The purpose of today's meeting is to consider and vote on the proposed scheme of arrangement (which I will refer to as the Scheme) between Nexus Energy Limited (which I will refer to as Nexus) and its shareholders, pursuant to which SGH Energy (No 2) Pty Limited, a wholly owned subsidiary of Seven Group Holdings Limited (which I will refer to as SGH), proposes to acquire all of the issued shares in Nexus for 2 cents per share. In accordance with Federal Court orders made on 7 May 2014, I will chair this meeting.
On 31 March 2014, Nexus announced that it had entered into a Merger Implementation Agreement with
SGH, under which this Scheme was proposed.
You will have received a Scheme Booklet containing a Notice of Meeting. The Scheme Booklet also contained:

 details of the Scheme and factors relevant to your voting considerations;

 information about SGH;

 the recommendation of your Board; and

 a report from Deloitte, the independent expert commissioned by the company to opine on the transaction and prepare a report for the benefit of shareholders.

The formal procedure for today's meeting is as follows:

 your Managing Director and CEO, Lucio Della Martina, will provide a background to the Board's recommendation and a summary of key matters relating to the Scheme;

 then, I will formally move the Resolution to approve the Scheme, which I will refer to as the Scheme

Resolution;

 I will allow for questions on the Scheme Resolution and, after any questions, we will move to a vote on the Scheme Resolution by poll; and

 following the conclusion of voting, the meeting will be closed.

As we disclosed to the ASX yesterday, following the deadline for casting direct votes and lodging of proxy appointments by 11.00 am on 10 June 2014, we had received approximately 897.7 million proxy votes in connection with the Scheme which represented 67.48% of all the issued shares in Nexus. The final audited proxy results provide that 50% of Nexus shareholders who have cast a direct vote or lodged a proxy appointment have voted against the Scheme and greater than 25% of the total number of Nexus shares on issue have voted against the Scheme. Unless a sufficient number of Nexus shareholders who have voted, or directed their proxy to vote, against the Scheme change their vote at today's meeting, the Scheme will not be approved and Nexus shareholders will not receive the scheme consideration.
Due to the complexity of the process involved in finalising the vote count today, it will take some time to compile the final audited results. The results of the poll will be announced on both the ASX and Nexus websites as soon as possible after the close of the meeting. Just to be clear, the final result will not be announced at this meeting.
The Board believes that the Scheme is in the best interests of shareholders and unanimously recommends that you vote in favour of the Scheme. All of your directors intend to vote in favour of the Scheme in respect of all of their shares, representing approximately 4.0% of all Nexus shares.
I would now like to ask Lucio Della Martina to outline the reasons for the Board resolving to proceed with and recommend the Scheme, and provide further details on the Scheme.

Nexus Energy Limited ABN 64 058 818 278 ■ Level 23, 530 Collins Street, Melbourne Victoria 3000

Phone: [phone] ■Fax: [phone] ■ Website: www.nexusenergy.com.au Page 1 of 2

Lucio Della Martina (Chief Executive Officer and Managing Director) Key comments on the Scheme

Before we proceed with the formal business of today's meeting, I would like to say a few words about the Scheme. Firstly, I would like to state upfront that Nexus management and Directors acknowledge the disappointment which many shareholders have expressed in that we have not secured a more favourable outcome for our shareholders despite our best efforts. However, we would like to bring to your attention the following key considerations:

 The Board resolved to enter into the Scheme following an extensive strategic review process that included consideration of a refinancing of the Senior Facility, a sell down of Longtom, Crux and Echuca Shoals and alternative funding solutions. The key challenge has been the high debt and significant capital commitments to support the asset growth plans. A sale of Crux, particularly a partial sale, at attractive prices was of course the ideal solution as it would have addressed the funding commitments of the business whilst maintaining potential upside for shareholders.

 The renegotiation of the Longtom GSA repositioned the asset by achieving a higher price structure, thereby making the asset more marketable. It also deferred Longtom 5 capex and avoided Longtom

6 capex of $100m plus. The Longtom divestment process also had the potential of relieving the substantial funding pressures on the business. However, despite an extensive process with some active interest, no binding agreement was achieved.

 In relation to the Crux sale process, Nexus' advisors approached a broad range of potential buyers or partners. As you know, we viewed Crux as an asset with attractive features. The inability to secure a binding agreement capable of acceptance was a real disappointment, notwithstanding our best efforts in conducting a well-publicised and extensive sale process.

 In addition to the asset sales processes we kicked off the corporate process to ensure all strategic options were explored. In the end, the Scheme as proposed was considered the best option.

 The Independent Expert has concluded that, in its opinion, the Scheme is fair and reasonable and in the best interests of Shareholders.

 The Scheme, if approved provides a certain and immediate cash return for Shareholders.

 No alternative proposal has been received by the company as at the date of this meeting.

 If the Scheme is voted down, SGH has advised Nexus that, outside of its participation in a Nexus administration or other insolvency process, no waivers or financial accommodation will be provided. Accordingly, the Board will need to place Nexus into voluntary administration. Further, SGH has advised that, as secured creditor and holder of more than two-thirds of the subordinated loan notes issued by the Company, it would be likely to enforce its security and may seek to acquire all of the shares in Nexus or its assets through the enforcement or administration processes.

 The Directors expect that any shareholder return would be unlikely if Nexus is placed into voluntary administration. This is a view supported by the Independent Expert who has acknowledged that if the Scheme is not approved, "the Board may be compelled to place Nexus into voluntary administration". On this basis, the Independent Expert has provided a valuation of Nexus under an "orderly realisation of assets" basis, under which they estimate that the "calculated preferred value" is "nil".

Thank you and I will now pass back to John Hartwell.

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