Bloomberg News

Lanco Griffin Unit Defeats Bid to Block Sale of Assets

December 23, 2012

Lanco Infratech Ltd. (LANCI)’s Australian coal-mining unit defeated a bid by a fertilizer maker in a A$5.8 billion ($6 billion) suit to block the sale of energy assets needed to move the miner to profitability.

Perdaman Chemicals & Fertilisers Pty, based in Western Australia, claimed that Griffin Coal Mining illegally terminated a coal-supply agreement after it was acquired by Lanco in 2011. Perdaman sued Lanco, India’s second-biggest non-state power utility, and Griffin, seeking the damages because it said the termination prevented it from getting financing for the construction of a urea plant in Western Australia.

Lanco has subsidized the operations of the coal unit whose loss totaled A$43 million in the year ended March 31, providing A$132 million from July 14, 2011, to Oct. 23 this year, according to court documents. A proposed sale of the Bluewaters power stations, operated by insolvent units of Griffin Coal, would let the miner operate without financial support from the parent, according to James Riordan, Griffin Coal’s chief financial controller.

“There is a real prospect that the Bluewaters transaction will have the effect that Griffin Coal will no longer need to rely upon Lanco India for financial support,” Supreme Court of Western Australia Justice James Joshua Edelman wrote in a Dec. 21 ruling, denying Perdaman’s request for an injunction to block the sale.

Purchase Terms

Kansai Electric Power Co. (9503) and Sumitomo Corp. (8053) agreed to buy the Bluewaters plants on April 8, 2011. The purchase conditions included the two companies receiving security in Griffin Coal that can be exercised in the event of an insolvency, if there is a default in the supply of coal, or if the coal doesn’t meet certain specifications, according to the ruling.

“The Bluewaters transaction is said to be imminent,” Edelman wrote. “The transaction is very large.”

The sale price was more than A$1 billion, the Australian Financial Review reported in 2011, citing an unidentified person familiar with the situation. The judge said the tax on the sale is likely to exceed A$20 million.

Perdaman argued the buyers’ rights will take priority if it is successful in its lawsuit and Griffin Coal is forced into bankruptcy as a result.

The state of Western Australia also urged the judge to reject Perdaman’s request, saying cessation of operations at Bluewaters would risk the reliability of the power supply, removing 431.8 megawatts of generating capacity from the grid.

The case is Perdaman Chemicals and Fertilisers Pty v. The Griffin Coal Mining Co. 2012/WASC502. Supreme Court of Western Australia (Perth).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net


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