Ilitha fails in bid to put Sunrise Energy under supervision
Ilitha Group, a minority stakeholder in the Western Cape gas importer Sunrise Energy, has failed in a bid in the high court to place Sunrise under supervision, in a case that shows a deep divide between shareholders.
Sunrise holds a multiphase, 25-year construction licence granted by the National Energy Regulator of SA.
In terms of the licence, it is permitted to construct, operate and manage a comprehensive liquefied petroleum gas (LPG) bulk import, handling and storage facility in the Saldana Bay Port, the only one of its kind in the Western Cape.
Major shareholders in Sunrise are the Industrial Development Corporation (IDC), which holds a 31% stake, with 60% of the group held by Mining Oil and Gas (Mogs). A total 51% of Mogs shareholding is held by Royal Bafokeng Holdings, while 9% is held by the Public Investment Corporation (PIC).
Ilitha, which holds a 9% stake in Sunrise Energy, insisted in papers before the Western Cape High Court that Sunrise has been insolvent since 2018. It said that though the financial statements of Sunrise are prepared on a “going concern basis”, this solely depends on a debt moratorium and continued support of shareholders.
It said if this support is discontinued, it would create material uncertainty and significant doubt over Sunrise’s ability to continue as a going concern.
Sunrise required R1.1bn upfront capital and debt financing to construct the infrastructure required for the terminal. It was funded for that endeavour by shareholder loans and senior debt obtained from the IDC and the PIC.
SUPPLIER CONTRACT
Sunrise argued before the court that there was no indication from the IDC and the PIC that they would ditch the company.
One of the issues between Ilitha and other shareholders is the supplier contract entered into between Sunrise and Vita Gas in 2018, claiming it was excluded from the negotiations between the parties before the agreement was reached.
Vita Gas, which counts global energy giant Vitol as one of its shareholders, in June 2023 pulled the rug from under the feet of Sunrise Energy, informing it that it would cease importing gas into the province. Sunrise said the move reeked of “deception”. Vita had an exclusive contract with the terminal to import and distribute LPG in the coastal province.
The sudden withdrawal of Vita Gas put the province’s LPG supply at great risk and led to shortages in the market for a few days. Downstream suppliers such as Afrox, Easygas and Oryx get LPG from the facility to distribute in the coastal provinces.
SUNRISE SAID THAT THERE WAS NO INDICATION THE IDC AND PIC WOULD DITCH THE COMPANY
The dispute between Vita and Sunrise came to a head in November 2022 when the Competition Commission, after a complaint by Sunrise, found that the contract contravened SA’s competition laws. The competition watchdog referred Vita to the Competition Tribunal over allegations of abuse of market dominance in the supply of LPG from import terminals in the Western Cape.
In the high court judgment, judge Nobahle Mangcu-Lockwood found Ilitha had failed to show the termination of Vita’s contract was detrimental to Sunrise’s finances.
“There is no basis for the applicant’s contention that Sunrise will not be in a position to meet its financial obligations as and when they arise or that it will become insolvent in the next six months as a result of not being able to make payments to its senior lenders,” the judgment reads. “There is no evidence before this court to establish that, after the termination of the Vita Gas agreement, Sunrise will not be able to meet its financial obligations.”
Sunrise did not respond to requests for comment.