Callide VAs sweating on directions as deadline nears

With binding purchase offers now in and the deadline for making a recommendation to creditors shortly to fall due, the administrators of the four companies that own half of the Callide power station in Queensland have plenty on their plate but as a recent court hearing has shown, when government is involved nothing can be assumed.

“CEPL considers it will be worse off if it loses its rights of pre-emption under this contract and so it will come after the administrators and that reinforces the need for a direction.” Counsel for John Park and Ben Campbell.

Yesterday in the Federal Court Justice Roger Derrington heard an application brought by FTI Consulting’s John Park and Ben Campbell for directions in their capacities as the administrators of IG Power (Callide) Ltd (IGPC), IG Energy Holdings (Australia) Pty Ltd (IGEH), IG Power Marketing Pty Ltd (IGPM) and IG Power Holdings Limited (IGPH) (together IG Group).

The directions are being sought because of the potential repercussions a sale of shares in the entities that the administrators control might have in the context of the Joint Venture Agreement (JVA) governing ownership of the Callide power plant.

The JVA was entered into in 1998 and depending on the construction of various clauses in the JVA, a sale could trigger pre-emptive rights held by the Queensland Government owned entities that are the other parties to the JVA.

The administrators’ counsel submitted that such an outcome could cruel any sale and potentially expose Park and Campbell to claims for breach of contract or misleading and deceptive conduct in respect of the dealings they’ve had with parties that have submitted binding bids.

Opposing the application for directions was Callide Energy Pty Ltd (CEPL) IGPC’s joint venture partner in the Callide C power station at Biloela and an entity wholly owned by the Queensland State government through CS Energy Limited (CSEL).

Counsel for CEPL told the court yesterday that the administrators should be denied the protection of court-sanctioned directions because they had not made all reasonable efforts to investigate the JVA, which has been amended several times since 1998.

This meant that the court could not be satisfied it was being provided with an adequate documentary record upon which an application for directions could be properly assessed. CEPL argued that the administrators’ application was premature at best.

There were submissions from both sides about the efforts Park and Campbell had made to date to obtain adequate records.

“It cannot be put against Mr Park that he has not engaged and not made reasonable enquiries,” the administrators’ counsel said. 

There were also submissions about how the JVA had evolved in terms of ownership, submissions that canvassed the various meanings of “ultimate holding company” and submissions about why CEPL wouldn’t have access to information in respect of the value of its own rights of pre-emption.

In reserving judgment Justice Derrington acknowledged the urgency and is expected to deliver his reasons soon.

Further reading:

Callide GPAs eliminate liability as funds dwindle

Deloitte duo capitulate on Callide