Shoreline negotiating out of court settlement

Restructure Shoreline - Brisbane, Australia
I have followed the discourse in your publication about the proposed buy-back of the Shoreline energy assets by the Government, it appears to me there has been no real exploration by the parties involved of other alternatives that would avoid the Government handing over money it may not have for the energy assets.

I would suggest that a possible middle-ground could be the restructure of Shoreline (or the Shoreline Group company that owns the energy assets) and, to use the parlance of the securities market, “float” the company. This would mean the restructure of Shoreline into a public company and most importantly to invite the public to subscribe for shares in the company.

While Tonga obviously does not have a regulated securities market or a history of securities trading there is no reason why Shoreline could not be owned by interested members of the public. The Tongan Companies Act should be consulted for the process to do so.

Some of the advantages I can see in such a move are:

a: while Government can subscribe for shares in the public company it does not have to find $60m to pay for the assets and then have to worry about running an energy company for which it may not have the expertise;

b: the Tongan public are given the opportunity to own shares in a monopoly company and share in any profits;

c: the company could possibly raise a substantial amount of money from the float depending on factors such as number of shares being issued, issue price, amount of money being raised and the interest from the public, and this money could be used to further the company's business;

d: the shareholders can bring the board of directors to account by way of the AGM and through their rights under the law and the Companies Act;

e: if he wanted, Tupouto'a as a founding shareholder could still own a fair chunk of the equity in the public company and later on he could offer his shares for sale to the public or by private sale if he wished and get

out of the company altogether.

The board of directors would of course have to be reconstituted with people who have appropriate experience in the areas required to run a public utility company such as people with business, legal and energy etc experience. The Companies Act will most likely require directors to act in the best interest of the shareholders, and failure to do so will be a breach of their duties and an offence. Significantly, the affairs of the company will have to be carried out in the glare of shareholder and public scrutiny as it will have, or should have, some fairly onerous disclosure obligations. Again, the Companies Act should be consulted in these matters.

I do not propose that the idea of opening up Shoreline to public ownership is the answer, there are inherent risks in any securities market or trading especially so for a market such as Tonga that has neither the experience in it nor the appropriate corporate and securities watchdog. But at the very least it illustrates that there are other avenues that the Government and Shoreline, with a little creativity, can explore to get Shoreline out of the maze it now finds itself, and avoid the $60m price tag that has everyone so hot under the collar.