The spectre of private access to public assets for the benefit of private commercial interests loomed large this week in the court clash between partners in the controversial power ships emergency power procurement tender.
Counsel for the warring parties — Turkish power ship parent company Karadeniz Holdings Ltd (KHL) and its local empowerment partner, Powergroup SA — traded barbs in the high court in Johannesburg on Friday over accusations by Powergroup that its removal was secured in an underhanded manner to benefit a new party in a scheme reminiscent of state capture.
KHL owns the majority stake in Karpowership South Africa (KPSA), a company awarded a 20-year contract to provide a little over 1,200MW of electricity through five power ships that will be docked at three South African ports — Saldanha, Coega and Richards Bay — at a cost of more than R200bn. Powergroup held a minority empowerment stake in KPSA.
The parties have fallen out over an alleged failure by the local partner to provide funding for the company as it struggles to make financial close by its year-end deadline.
Powergroup applied for an interim interdict to stop KHL concluding a shareholders meeting which began on Wednesday, at which KHL took back its shares in KPSA and updated the share certificate to reflect that it now owned 98% of the joint company. It is unclear who holds the remaining 2%.
On Friday, Powergroup asked the court to prevent KHL from holding a vote on the value of its shares, and the subsequent loss of its shares, pending the finalisation of a private arbitration process into whether the issuance of funding notices that triggered the fallout was valid.
Business Times has also established that this week, the Turks offered to pay R10m to Powergroup to part ways. In previous court papers they had asserted that Powergroup’s stake was worth only R83.
In court papers, Powergroup charged that KHL deliberately misrepresented it as a non-contributing shareholder to transfer its stake to the Turks’ new nominated BEE partner, Anna Mokgokong.
Powergroup claimed it was never asked to provide funding to the joint company until February and March this year. It further alleges its representatives were hauled before KHL owner Orhan Karadeniz at a meeting in Istanbul in January to pressure them into selling Powergroup’s shares to another BEE partner whose identity was not revealed to them at the time.
In court papers, KHL said: “At that meeting, Karadeniz indicated that the Karpowership projects were not going to reach financial close; [and] Powergroup had not met the expectations of Karadeniz with regard to the successful conclusion of the projects. Karadeniz wished to mitigate its financial risk by bringing in a BEE shareholder to take over the Powergroup shares.”
However, in a responding affidavit, Powergroup director Sureshan Moodley said Orhan Karadeniz told them at the meeting that their shares were worthless and that any payment he “offered” them “would be a gift package”.
“Karadeniz had even prepared documents to give effect to the transfer of shares and that we were to sign [them].”
The case also exposes the department, as it now sits with a situation where a preferred bidder has changed a major condition of its award
But in his affidavit, Mehmet Katmer, MD of KPSA and KHL representative, dismissed Moodley’s claims about Orhan Karadeniz.
“Mr Moodley’s affidavits are riddled with accusations of unlawfulness, oppression of minorities, circumvention of the law and so forth. The affidavit uses very emotive language and contains an array of buzzwords to paint the respondents in a bad light.
“I find this most unfortunate and have refrained, as far as possible, from responding in a similar fashion and simply place the required evidence before court. I can only assume that the affidavit has been drafted in such a fashion in order to attempt to garner sympathy from the court in the absence of sound facts and legal arguments to support the far-fetched, ill-conceived and meritless case advanced by Powergroup,” said Katmer.
Powergroup’s counsel, Tembeka Ngcukaitobi, argued that the intention to remove his client was part of the fulfilment of an underhand scheme, agreed to in November 2022, which was akin to “state capture on steroids”.
This, he said, was after it emerged that a company owned by Mokgokong and her business partner Joe Madungandaba had already reached an agreement with KHL to take over Powergroup’s stake.
Mokgokong previously denied this to the Sunday Times, saying she was not in negotiations with KHL to take over Powergroup’s stake and was in discussions with the Turkish company as part of engagements with other sector players.
Ngcukaitobi charged in court: “It is an astonishing agreement. It is state capture on steroids. What is happening is that Dr Mokgokong, Mr Madungandaba, and Mr [Sechaba] Moletsane [a Powergroup partner who fell out with his fellow directors] have agreed to give access to a state asset, which is the gas storage facility in Coega, to Karadeniz.
“In exchange, Karadeniz has given them 49% of the consortium that belongs to my client. This is despite the fact that neither Mr Madungandaba nor Dr Mokgokong were bidders in the first place.
“If Powergroup does not get the interdict, that agreement which exchanges the Coega storage facility, which belongs to the Strategic Fuel Fund and not [Mokgokong’s company] BHI … comes into operation. And let no minister of state say that they were not aware. Powergroup has now exposed the underlying scheme of giving a public asset in exchange for private benefit. This country has had enough trauma from state capture,” he argued.
This drew a strong response from KHL’s counsel, Adrian Botha, who labelled Ngcukaitobi’s accusations “reckless”.
In his rebuttal, Botha said the matter was about shareholders exercising a call option in the event that other shareholders were found to be non-funding. He added that the agreement with Mokgokong’s BHI was not clandestine as Powergroup had charged, and that the applicants themselves had said in their papers that they were asked to negotiate a price with them.
“If [Powergroup] say the issue is the shares, and they must come to court for that, well the authorities we refer to in our heads [of argument] say you can’t come to court when the harm has already happened. And the interdict is for future conduct, not past conduct. So, the transfer of shares has already happened, but it’s irrelevant because we can all deal with it at arbitration,” he said.
Botha then attacked the state capture narrative, saying: “It is reckless to make such statements in an argument when we’ve even got people from the press in the court today ... It’s appalling that that is suggested when we have not been given an opportunity to address it properly, but there is absolutely no merit to it.”
Another factor that loomed large was that Friday’s hearing was reduced to an almost academic exercise as KHL had already taken possession of Powergroup’s shares despite the fact that the interdict was pending before court, and that there was no consent from mineral resources & energy minister Gwede Mantashe, whose department awarded the bid to KPSA.
The case also exposes the department, a respondent in the matter, which had not filed any papers, as it now sits with a situation where a preferred bidder has changed a major condition of its award, rendering the tender without an empowerment partner.
Department spokesperson Nathi Shabangu declined to respond.
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