In addition, Sydney Gas has appointed a new chairman, Ray Schoer, to replace the outgoing Michael Norster. Norster, who stepped down due to "other business committments", will continue to serve as a non-executive chairman, according to Sydney Gas.

The recapitalisation plan, which is subject to certain conditions and shareholder approval, also includes establishing a new convertible note facility through Babcock & Brown.

A prospectus for the rights issue was lodged with the Australian Securities and Investments Commission (ASIC) this morning.

About $20 million of the money raised will be used to fund the repayment of Sydney Gas’ current convertible notes, which mature on June 1, 2006. The remainder of the funds raised will be used to pay Sydney Gas’ share of development and exploration costs under its coal seam gas joint venture with AGL.

Schoer said he believed the recapitalisation plan was in shareholders best interests and would give Sydney Gas a “solid financial base.”

“QGC’s takeover offer containing a proposal to refinance Sydney Gas’ current convertible notes was subject to the highly conditional offer succeeding, and this was not certain within the timeframe for Sydney Gas’ cashflow needs, if at all,” he said.

“Furthermore, Sydney Gas had been investigating funding alternatives well before QGC’s offer was announced.”

QGC's revised bidder’s statement will be sent out on Tuesday, April 11. Sydney Gas must despatch its statement within seven days of QGC sending out its statement.

Sydney Gas executive director Stephen Kwik has reiterated his board's position that shareholders take no action on the offer.

“It is disappointing that it has taken QGC so long to make the corrections ordered by the Takeovers Panel," he said.

"However, at least our shareholders will now be provided with a bidder’s statement that clearly sets out the details of QGC’s offer and corrects the numerous errors, omissions and misleading statements in the original and supplementary statements."

QGC’s offer, which is due to close on Friday, May 12, also includes a funding package to meet the redemption of convertible notes worth $A30 million in two tranches in April and June.

QGC made the scrip bid for Sydney Gas in late January, offering Sydney Gas shareholders one QGC share for every two Sydney Gas shares held.

QGC managing director Richard Cottee said he would now be seeking clarification on how Sydney Gas intended to meet its financial commitments in its responding target’s statement.

“For the first time SGL directors have a legal obligation in the target statement to provide SGL shareholders with its plan to deal with SGL’s looming funding crisis and repay its convertible notes of $30 million, and fund its $34.5 million in committed joint venture expenditure and $17 million of exploration,” Cottee said.