gas in poland, page-15

Hi Dex and Bart,

I m new to this board but have been following EPG from a long time getting in at a much higher price.

Regarding the acquisition cost of Gazonor it is my understanding that it was EUR26m and there was another EUR10m that has been entirely wasted looking at the annual report. I think previous management has done a lousy job there but this is not the point. From what I can read from the news releases, new management came in and was supposed to solve a few issues as announced during the AGM, mainly the debt restructuring, which is by far the most important.

Transcor, controlled by CNP, owns EUR38m of debt, with EUR26m pledged to Gazonor. As Bartom rightly pointed out it is very unlikely that CNP will be looking to walk from this with anything less than 100% of Gazonor as well as a stake in the exploration assets. You have to understand who CNP is. It is controlled by Albert Frere one of the richest people in Europe and owns through different companies more than 5% in Total, 21% in Lafarge, 5% in GDF Suez etc. He is extremely influential in Europe. The deadline for a restructuring of the note has long goneand the fact that Transcor nominee, de Potter, has resigned from the board shows that Transcor is playing hardball.

There has been some announcement about a MOU with a consortium but I don t see who will be willing to take EUR38m against anything less than total control of the CMM asset and more. That is obviously what Transcor is thinking as well. Also you have to understand that due to their extremely powerful position in Europe I doubt any European bank is going to stand against them. So even if there is a consortium it seems to me the terms might not be much more attractive than Transcor.

On another note considering that excess debt is the major issue the fact that management has issued even more debt is not reassuring even at 0%.

Finally I was quite optimistic on the CBM asset due the other companies in Australia and the fact that European gas prices are higher. However it seems the company has difficulty getting their gas out in Lorraine due to low permeability but I m not an expert there. Does any of you has more knowledge on the subject?

All in all while I first was very bullish on EPG, the current situation makes it very difficult for me to see how the share price rebounds from there. Best case scenario there is massive dilution and the share price stays where it is or go slightly down as we end up with just the CBM asset, worst case the company goes bust. For me the risk reward is not that attractive at this stage.

I know I sound very pessimistic but I just don t see how we go up from there. Let me know your thoughts.

Marc