Gupta mines ‘face ruin’ as Eskom warns of coal supply ‘challenges’
Revealed: New court bid to have ‘incompetent’ business rescue practitioners removed
In the fourth legal onslaught against the business rescue practitioners overseeing Gupta companies, the CEO of Optimum and Koornfontein mines, George van der Merwe, is now seeking a court order to have the BRPs removed.
In court papers seen by Times Select, Van der Merwe last week filed an application with the Pretoria High Court to remove Kurt Knoop and Louis Klopper. He slams them as “incompetent” and claims their actions are negatively affecting the businesses.
This comes as Eskom last week had to inform the National Energy Regulator of SA (Nersa) it was facing shortages of coal at seven power stations. Eskom has blamed this on “historical underinvestment at cost-plus mines” and an undersupply of both quantity and quality of coal from Gupta-owned mines. It has denied reports that load shedding was imminent (read the full Eskom statement at the bottom of the page).The two business rescue practitioners for the Optimum and Koornfontein mines were appointed by Gupta company directors on February 16 this year to oversee the business rescue process of both coal mines, and have fended off a series of court battles to have them removed.
This includes an application by the Industrial Development Corporation, which wants to recover a R250-million loan to the Gupta family in 2011 to purchase Shiva Uranium, the Guptas’ uranium mine near Klerksdorp. The IDC stated it was not of the view that the BRPs were objective or independent. The matter was heard on April 10 and postponed to May 23.
Another court application by a creditor to Optimum, Direko Mining, whose sole director Andile Qaku in court papers accused the BRPs of being Gupta puppets, was postponed indefinitely on March 20. The parties now have until September 30 to approach the court to secure a date.The National Union of Mineworkers was the first to ask the courts to remove Klopper and Knoop –but subsequently withdrew the application, instead asking that two additional BRPs of their choosing be appointed, resulting in Juanito Damons and Kgashane Monyela being brought on board.
Van der Merwe states their appointment was irregular, and wants the court to remove them along with Klopper and Knoop.
The matter is likely to be heard on May 10. The business rescue pracitioners have denied the allegations but would not comment further, saying the matter was sub judice.
On Monday the BRPs published a 690-page business rescue plan that detailed a lucrative deal brought to the table by billionaire businessman Quinton van der Burgh’s company, Burgh Group Holdings, and international oil dealer Vitol.
The deal, which will see Optimum exporting 50 million tonnes of coal at a premium price of R1,000 a tonne, is being hailed by the BRPs as the saviour of the mines and will see a cash injection of roughly R200-million a month into the mines.
This is part of a 12-month contract Burgh Group secured to manage the mines, effectively saving the businesses from the brink of closure.
Van der Merwe has slammed the deal in court papers, saying a better deal had been offered by African Iron Ore, which the BRPs had rejected.
Van der Merwe wants to appoint two new business rescue practitioners, Mahier Tayob and Jeremy Mashamba, “in the interests of the companies’ creditors and of the companies themselves” instead.
He claims that “the decisions, omissions, incompetence, inactivity and general disarray” of the BRPs had resulted in penalties exceeding R3-million a day levied by Eskom not being dealt with. This resulted in Optimum losing the facility to export coal at the Richards Bay Coal Terminal.
Eskom fined Optimum R100-million for short delivery of coal in January – a month before the BRPs were appointed. Van der Merwe argues in his papers that the BRPs have failed to deal with the penalties effectively, meaning that Optimum will “face ruin” when it emerges from the business rescue process.In the business plan, which Times Select has seen, the BRPs highlight Post Commencement Finance loans they have secured which will ensure funds owed to Transnet Freight Rail and RBCT can be paid.
Van der Merwe further lamented the cancellation of a sale of shares agreement to Charles King SA, a suspected Gupta front company run by Dubai businessman Amin Al Zarooni – saying the cancellation of this agreement opened Optimum up to “ruinous litigation” that “threatens [Optimum’s] very existence”.
Times Select revealed last month that Al Zarooni had written to the BRPs to inform them that a deal had already been signed for him to buy the mines in August 2017 and demanded they stop negotiating with other potential buyers.
“[Optimum] stands to suffer irreparable harm if the relief sought in this application is not granted. The account of events which I provide above demonstrates the likelihood that each will end up in liquidation,” Van der Merwe states.
Klopper dismissed the allegations made by Van der Merwe as fiction when contacted for comment, but he would not elaborate, saying the matter would soon be before the courts.Eskom denies price increase
Eskom meanwhile confirmed in a statement on Monday that it was considering a proposal from the BRPs to reduce the amount of coal Optimum supplies to Hendrina Power Station.
The utility’s spokesperson Khulu Phasiwe denied however that Eskom was considering increasing the price per tonne from R200 to R430 – the figures which are quoted in Optimum’s business rescue plan.
Optimum currently supplies 400,000 tonnes a month – and the BRPs want to cut that down to 200,000 tonnes, while exporting the remainder at a much higher price.
Phasiwe said that if any reduction in supply is agreed on, it would be at the current rates.
“Eskom is not in possession of the business rescue plan yet. However, it can confirm that it has requested the plan from the business rescue practitioners so it can engage amicably as an affected party,” Phasiwe said.
Eskom has also had to inform Nersa that it is facing shortages of coal supply at seven power stations.Hendrina and Majuba, which is supplied by the Gupta-owned Koornfontein, are among the stations that now have less than the required 20-day stockpile.
Optimum’s 40-year coal supply agreement with Eskom comes to an end in December.
But Eskom’s interim group chief executive, Phakamani Hadebe, was quick to allay fears over load shedding.
“Eskom has contracted 84% of the coal it requires over the next five years. A recovery plan is in place to address the short-term imbalance of coal and to improve the stock days at the seven stations below minimum,” Hadebe said last week.