ARE THE GUPTAS TRYING TO STEAL BACK OPTIMUM?
It’s well over three years since Optimum Coal Mine was placed into business rescue. Now, new concerns about possible Gupta influence may slow proceedings further
nce a national asset, the embattled Optimum Coal Mine is still on an arduous journey to revival — despite being in business rescue, along with several other Gupta-linked entities, since February 2018.
Historically, Optimum supplied Eskom’s adjacent Hendrina power station with coal by conveyor belt, while an entitlement at the Richards Bay Coal Terminal facilitated exports of up to 6.5Mt of coal a year. That’s an especially valuable concession now, with export coal prices at their highest level in 13 years.
But with an approved business rescue plan unfolding and production growing, Optimum’s hard-won recovery has been hit by further challenges. Not only is Eskom refusing to engage with the company on coal supply, but it is also probing the business rescue plan that it, as a major creditor, voted in favour of in September 2020.
At first, the sale of Optimum was deemed the best course of action. But when the interested parties were unable to come up with the required funds, Optimum’s creditors and other affected parties voted in favour of a debt-to-equity arrangement. Under that, Optimum’s largest creditor, Templar Capital, would convert its $74m claim (just over R1bn at current rates) into equity in the New Optimum, now called Liberty Coal, and production would begin to ramp back up.
Now Mmusi Maimane, leader of the One SA Movement, has sounded the alarm. In a March letter to the Eskom board chair, he asks the utility to consider amending the business rescue plan for Optimum Coal
Mine — or at least apply to place it on hold — pending investigation.
This follows the “discovery of new and
Osalient information” that suggests the Guptas may be sneaking back into SA’s energy sector “via a Trojan horse”.
In Maimane’s view, that horse seems to be Templar Capital. The Bermuda-based investment firm became Optimum’s primary creditor after Centaur Ventures ceded its claim against Optimum last year.
Centaur Ventures, Maimane writes, “has a questionable link with the Gupta family” and was until recently 50% owned by Akash Garg — the bridegroom in the infamous 2013 Gupta
wedding at Sun City.
Maimane suspects the company was used as a conduit to launder Gupta money out of SA via Bermuda.
He goes on to raise particular concern over a 2020 Bermuda Supreme Court judgment, which he says awarded Gupta-run Griffin Line General Trading a $100m claim against Centaur Ventures.
Templar Capital is owned and run by
Daniel McGowan. He’s also owner of the Centaur Group, which held the remaining 50% of Centaur Ventures.
Centaur Ventures features in other legal action linked to the Guptas. In proceedings against tainted SA company Trillian, liquidators have labelled Centaur a “Gupta puppet” and source of the family’s alleged ill-gotten revenues. (Centaur is yet to file its responding papers in that matter.)
Maimane has multiple concerns: that Centaur Ventures may be trying to cover its and the Guptas’ previous sins by having a direct say in the Optimum operations; that the Guptas, through Griffin Line, will claim $100m from Centaur and, by implication, from Optimum; and that Centaur and/or the Guptas could continue to extract further value from SA’s energy crisis.
“The red flags are there and can’t be ignored,” Maimane writes. “We have been down this road … and can’t afford to allow any cover-ups of corruption, any more money funnelling to the Guptas or, worse, a Gupta ally running the show at Optimum.”
As a result of the complaint, Eskom has appointed Chavani Risk Advisory & Forensic
What it means: The Gupta name crops up once more in claims about them sneaking back into SA’s energy sector
Services to investigate. Eskom CEO André de Ruyter, however, says it would be inappropriate to comment further at this stage.
McGowan, in response to the FM, denies that he, Templar or Liberty Coal have any remaining link to the Gupta family.
He provides a detailed account of how, in 2015, Centaur Ventures was approached by the Guptas’ Tegeta Exploration & Resources to identify business opportunities related to Optimum’s coal export allocation. Centaur ultimately went on to secure purchase contracts with the mine, and traded coal on the international market.
When Optimum went into business rescue, Centaur’s prepaid purchase contracts were not honoured, says McGowan. Though the rescue proceedings protected Optimum from its creditors, Centaur was left in a position where it had to return certain prepayments to its own customers, putting stress on its balance sheet.
Centaur put in creditor claims, but when these were rejected by Optimum’s business rescue practitioners (BRPs) in 2018, the company launched urgent legal proceedings, McGowan says. As a result, the BRPs submitted Centaur’s creditor claims to accounting firm BDO for thirdparty verification, and they were confirmed.
It was, says Optimum BRP attorney Bouwer van Niekerk, a transparent process, supported by numerous expert opinions that were confirmed in arbitration proceedings and eventually made an order of court.
To fulfil their statutory duties — and knowing that this could be a contentious issue — Van Niekerk says the BRPs “expended substantial man-hours and funds, internally and via independent, internationally recognised experts”, to ensure Centaur’s claim “was thoroughly scrutinised before being recognised in the business rescue proceedings”.
The Centaur claims against Optimum were ceded to Templar in June 2020.
Van Niekerk says the BRPs had no say in the adoption of the rescue plan, which creditors such as Eskom and employees voted in favour of adopting. “The BRPs … do not concern themselves with allegations made by third parties in legal proceedings that do not concern them or Optimum,” he says. “Rather, they rely on the expert advice given to them, and they fulfil the mandate given to them by the company’s affected persons.”
The rescue plan’s implementation is overseen by the BRPs, in consultation with Liberty Coal. That means Centaur has no executive power over Optimum — and never has had, says Van Niekerk. Neither, for that matter, do Templar Capital and Liberty Coal.
McGowan insists there is no legal basis for Templar, Optimum or Liberty Coal to make payments to Griffin Line or to the Gupta family.
He argues that Griffin Line wasn’t actually awarded $100m, or any monetary judgment, against Centaur. Rather, court papers show that Centaur was slapped with a freezing order, preventing it from moving assets from Bermuda or unjustifiably diminishing the value of its assets outside of that country. The order doesn’t prohibit it from dealing with, or disposing of, any of its assets in the ordinary and proper course of business.
McGowan believes the injunction has no actual effect, as Centaur had already ceded its claim for Optimum by the time it was made and, on his interpretation, it’s now irrelevant, given that Centaur Ventures is in provisional liquidation.
In any event, in terms of the business rescue plan, the BRPs say it’s not possible for Templar or Liberty Coal to do as they wish with the proceeds from Optimum. “[Optimum] is not entitled to pay any monies to Griffin Line, as Griffin Line is not a creditor of Optimum,” Van Niekerk says.
Meanwhile, Centaur is embroiled in litigation both against and in defence of numerous Gupta associates, including Garg, his company AGEV Investment Ltd, and Oakbay Investments.
McGowan claims Garg “jumped ship” before various loans taken out by Garg and his associates fell due. They owe about $50m, he says, and that’s what pushed Centaur Ventures into liquidation.
Centaur has legally pursued AGEV abroad, and last year obtained an order for committal and warrant of arrest against its directors.
“With the benefit of hindsight, as with anything in life, there are potentially many things I would do differently,” McGowan says. “Would life have been easier for me personally if I had never heard of the Gupta family or met Mr Garg? Quite possibly so. Would life have been easier for me personally if the Centaur Group had never formed the Centaur Ventures joint venture with Mr Garg? Most definitely so. Do I believe Centaur Ventures has done anything wrong, legally or otherwise, in the business dealings Centaur Ventures did with Optimum Coal Mine? Categorically, no.”
Would life have been easier for me personally if I had never heard of the Gupta family or met Mr Garg? Quite possibly so
Daniel McGowan
Against this backdrop, the National Union of Mineworkers (NUM) is supporting the adopted business rescue plan.
In a recent letter to De Ruyter, the union says Maimane’s claims are “factually inaccurate, logically fallible, and legally offensive”.
NUM says any action by Eskom to overturn the plan is an “insult” not only to “the legislative framework that oversees the process, but also the rights of nearly 88% of the creditors who voted in favour of the adoption of the business rescue plan”.
Still, Eskom seems in no hurry to procure coal from Optimum again, despite production having ramped up to 250,000t a month, as mined by contractors at present.
Instead, as the BRPs understood it last February, coal for Hendrina is travelling 26km-136km by truck, at a transport cost of R71-R244 a ton.
As it stands, Optimum owes Eskom a hefty sum. The original claim of about R5.6bn was reduced to R1.2bn in arbitration. It’s now
R255m, payable over five years.
Where the power utility could have received coal from Liberty Coal to offset the Optimum debts, it instead elected to receive cash over a five-year period at 20c on the rand.
“Eskom insisted it does not have a mandate to have any discussions to purchase coal from [Liberty Coal], and further insisted that a new coal supply agreement could not and should not be a suspensive condition to the business rescue plan,” Van Niekerk says.
As a result, he believes no incremental value has been created for Eskom, and taxpayers aren’t receiving coal from the mine at a lower price — or at least at a significantly lower transport cost — per ton.
Despite there being a conveyor belt between the mine and the power plant, Van Niekerk says Liberty will probably end up transporting grades of coal suitable for Hendrina to other customers, while Eskom continues to truck in coal at taxpayers’ expense.
Eskom, for its part, tells the FM it cannot engage any supplier outside of an open tender procurement process without consent from the National Treasury. In any case, it says, Hendrina’s coal requirements are fully catered for by existing supply agreements.