Late on Monday, Sydney Gas issued a statement urged shareholders to ignore claims made in a letter from QGC that argued his company’s recapitalisation plan was “seriously deficient”.

Sydney Gas chairman Ray Schoer told his shareholders this letter was “inaccurate and designed to caused confusion” and refuted QGC’s claim that his company was facing a $31 million shortfall in meeting its proposed developments.

“Sydney Gas directors regard that letter as the latest desperate move by QGC in relation to its failing takeover offer,” he said.

He said the company had $71 million in capital expenditure commitments over the next three years and could pay for this through its $50 million recapitalisation plan, cash reserves and gas sales revenue.

Not long after Schoer’s statement was released to the ASX, the Takeovers Panel issued an announcement revealing that QGC was seeking an interim order to stop Sydney Gas shareholders from voting on the recapitalisation plan.

The panel said QGC had claimed Sydney Gas’ target statement in relation to the recapitalisation did not provide its shareholders with sufficient information.

Earlier this month, Sydney Gas announced plans for a $50 million share placement to repay its convertible notes debt.

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

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.