AGL Announces Offer to Merge with Alinta

Sydney, Mar 13, 2006 (ABN Newswire) - The Australian Gas Light Company (ASX: AGL)(OTCBB: AOGC)(PNK: AUGLF) today announced an offer to merge with Alinta Limited (ASX: ALN), offering 0.564 AGL shares for every Alinta share, implemented through a scrip-for-scrip off-market takeover offer by AGL for all Alinta ordinary shares. Following the merger, AGL intends to proceed with a demerger of the combined AGL/Alinta energy and infrastructure businesses.

The offer is based on the same ratio as Alinta's proposal of 1.773 Alinta shares for every AGL share. AGL considers this ratio to be appropriate reflecting the relative value of each business in the context of a true merger.

AGL Chairman Mark Johnson said that after careful consideration the AGL Board had rejected the Alinta proposal. Mr Johnson said it would effectively constitute a takeover of AGL at a price substantially below fair value.

Mr Johnson said: "There is a compelling case for the two businesses to combine, particularly the infrastructure operations. Our offer is an interim step to a demerger of the expanded infrastructure and energy businesses. It builds upon Alinta's proposal and will achieve the best combination of Board and management strengths."

Each of the demerged energy and infrastructure businesses is expected to rank in the ASX 50. This will provide enhanced index weighting and liquidity for Shareholders.

"The energy business and infrastructure business will be Australian leaders in their respective sectors. Each business will focus on its own strategy for creating shareholder value and lead to faster realisation of growth opportunities. In addition, this structure is expected to have fewer competition issues", Mr Johnson said.

"The combined energy business will draw on AGL's skills and capabilities in the deregulated and highly competitive energy sector, allowing it to focus on its substantial growth potential without the dilution of focus that would occur in an energy business that is also an infrastructure fund manager. AGL's Chief Executive Officer-elect, Paul Anthony, will become CEO of the combined demerged energy business.

"Alinta has performed well under the leadership of Chief Executive Officer Bob Browning and AGL will seek to utilise his experience in the role of CEO for the combined demerged infrastructure business. Accordingly, AGL will invite Mr Browning to consider the role of CEO of the combined infrastructure business upon the successful completion of the offer.

Following the successful completion of the offer, the AGL Board intends to invite four members of Alinta's Board to form a combined interim Board of 10 directors (the maximum permitted under AGL's Constitution). The optimal composition of the Boards of the demerged energy and infrastructure businesses will be determined before the demerger.

The AGL Board considers that its proposed merger with Alinta and subsequent demerger of the expanded infrastructure and energy businesses represents a better alternative for AGL Shareholders than the current demerger.

Accordingly the Board now withdraws its recommendation on the current demerger proposal and will ask the Federal Court to cancel the Shareholder meeting which has been convened for March 27 to consider the demerger. AGL intends to schedule a new meeting for Shareholders to vote on a revised demerger proposal after the successful completion of the AGL offer.

AGL's Offer
Under the AGL offer, Alinta shareholders will receive 0.564 AGL shares for each Alinta ordinary share.

The acquisition is expected to generate dividends per share (DPS) of at least the level indicated in Alinta's proposal. Pro forma DPS under Alinta's proposal is 88.7 cents per share for the year ended 30 June 2007.

Upon acceptance of the offer, AGL will merge with Alinta before fully demerging into a combined energy business and a combined infrastructure business.

The benefits of the AGL offer include:

Combined infrastructure business:

- Will be Australia's leading energy infrastructure group, with independent corporate management, a highly skilled asset management workforce and a diversified infrastructure portfolio. The business will not be externally managed by the energy business and will include infrastructure services business Agility;

- Combined energy business: Will be Australia's largest integrated energy company, with a significant presence in all states, and exposure to fast-growing energy markets in Queensland and Western Australia;

- The two independent businesses will be able to grow by focusing on their strengths, without cross shareholdings or fees between them;

- AGL can obtain stand alone cost savings in excess of those offered in the Alinta proposal, particularly associated with the energy business; and

- AGL's commitment to the PNG Gas Project and the Townsville Power Station project will not be affected.

Offer conditions
The AGL offer is conditional on AGL acquiring not less than 90 per cent of the ordinary shares in Alinta, no objections from the Australian Competition and Consumer Commission and other conditions as set out in Attachment A.

Bidder's Statement
Further information on AGL's offer will be contained in AGL's Bidder's Statement which will be served on Alinta and lodged with the Australian Stock Exchange and the Australian Securities and Investment Commission within the statutory timeframe.

Shareholder Information
Further information on AGL's merger proposal will be lodged with the ASX and included on AGL's website. AGL and Alinta shareholders with questions on the offer should contact the AGL Information Line on 1800 824 522 from within Australia or 61 2 8280 7012 from outside Australia, between 8.30am and 5.30pm (SYD time), Monday to Friday.

AGL is advised by Goldman Sachs JBWere, UBS and Gilbert + Tobin.