White Energy updates E. Kalimantan coal upgrading project
Thursday, October 31 2013 - 09:09 AM WIB
1. PT KALTIM SUPACOAL (?KSC?) ? JOINT VENTURE WITH PT. BAYAN RESOURCES (?Bayan?) -WEC 51%
Update on Legal Dispute
As previously advised to shareholders, BCBC Singapore Pte Ltd (?BCBCS?) and Binderless Coal Briquetting Company Pty Limited (?BCBC?) are currently involved in legal proceedings against Bayan and Bayan International Pte Ltd in the High Court of the Republic of Singapore, over matters relating to the Tabang coal upgrading plant, located at Bayan?s Tabang mine in East Kalimantan, Indonesia.
The issues in the proceedings include a claim by BCBCS and BCBC against Bayan for damages for breach of the Joint Venture Deed between the KSC shareholders, including the obligation to supply coal to KSC and the obligation to provide funding to KSC. Bayan has filed a defence to the claim, and also a counterclaim against BCBCS and White Energy seeking damages.
Bayan purported to terminate the Joint Venture Deed in February 2012, which BCBCS regarded as a wrongful repudiation. Following BCBCS acceptance of Bayan?s repudiation, the KSC Joint Venture was brought to an end. BCBCS is pursuing Bayan for all damages suffered as a result of Bayan?s wrongful repudiation.
The directors believe that BCBCS took all steps to fulfils its joint venture obligations and that the failure of the Joint Venture is due to Bayan?s failure to supply coal and provide funding to KSC and its purported termination of the Joint Venture Deed.
Following an application by BCBCS, the Supreme Court of Western Australia made freezing orders in respect of Bayan?s 56% shareholding in Kangaroo Resources Limited, a publicly listed Australian company. Bayan sought to challenge the grant and scope of the orders, including a challenge to the Court?s jurisdiction to make such orders (including on constitutional grounds). This challenge was heard by the Supreme Court in February 2013. On 26 June 2013 the Supreme Court dismissed Bayan?s challenge to the grant and scope of the freezing orders and extended the freezing orders indefinitely. In its reasons for decision, the Supreme Court found that, amongst other things, BCBCS had established the elements necessary to obtain a freezing order, including that BCBCS had established for the purposes of its application for a freezing order that it had a good arguable case: (i) in respect of its claim against Bayan for breach of the Joint Venture Deed; and (ii) to recover damages in respect of at least its lost investment in the KSC Joint Venture.
On 15 July 2013, BCBCS was served with notice of Bayan?s appeal from the orders made by the Supreme Court. Bayan?s appeal is limited to a challenge to the Supreme Court?s jurisdiction to make those orders. Bayan is not appealing the Supreme Court?s findings that BCBCS had established the elements necessary to obtain a freezing order, including that BCBCS had established for the purposes of its application for a freezing order that it had a good arguable case.
Status of Tabang Operations
As a result of the above dispute, KSC suspended operations at the Tabang plant in tate November 2011. At the time of suspension of operations at Tabang, the various plant modification works being undertaken at site were over 95% complete.
Following a petition filed by a number of local creditors of KSC in the Commercial Court of Surabaya, Indonesia, administrators were appointed to KSC and KSC has now been placed into bankruptcy. Curators have been appointed to manage this process. All (SC staff have been terminated from the Tabang site. The Curators are currently seeking to realise KSC?s assets with the object of distributing any proceeds to KSC?s creditors.
As shareholders are aware, the White Energy Group has previously fully impaired its investment in KSC and as such the bankruptcy process will not have any further impact on the accounting results of the White Energy Group.
2. BALANCE SHEET AND CASH RESERVES
As outlined in the attached, the Company had approximately $84 million in cash reserves as at 30 September 2013, which includes the $2 million security bond paid to the Supreme Court of Western Australia in April 2012, in support of the freezing orders made against Bayan?s shareholding in Kangaroo Resources Limited.
During the September 2013 quarter, the repayment date for US$8 million in shareholder loans previously provided by Black River to River Energy and guaranteed by White Energy, was extended until 31 December 2013. It is intended that this loan amount will be converted into equity in River Energy upon satisfaction of the relevant conditions in the contractual arrangements between the parties (this will be in the form of additional subscription monies for Black River?s 49% equity interest). Otherwise, the loan amount will become payable on 31 December 2013, unless further extended.
The US$20 million consideration for the purchase of Mountainside Coal Company (MCC) will be reflected in the December 2013 quarterly report, given that settlement occurred in early October 2013. (end of excerpt)