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Sale of Tegeta coal terminal stake may be thwarted

Sep 13 2016 07:43
Ferial Haffajee, Paul Burkhardt and Franz Wild
Coal

(File, iStock)

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SOUTH32 LIMITED [JSE:S32]

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One company. Three deals. So many questions.

 

Johannesburg - Vitol Group’s plans to buy a stake in Africa’s biggest coal terminal from a company controlled by South Africa’s Gupta family, who are friends of President Jacob Zuma, could be thwarted by the preemptive rights held by existing shareholders in the export facility, people familiar with the matter said.

Buying the stake in the Richards Bay facility from Optimum Coal Holdings would give Geneva-based Vitol rights to ship about 8 million metric tons of the fuel from South Africa annually, strengthening its position in the coal trade in a country that’s a key supplier to India and China. The Swiss commodities trader is interested in buying the stake, a person with knowledge of the matter said earlier this month.

READ: Optimum's sale of coal exports rights 'makes sense' – analyst

Some shareholders are reluctant to let a non-mining company hold a stake in the facility, and would need to waive their rights to buy the stake themselves, three people said, asking not to be identified as the shareholder agreement, that includes the preemptive agreement, is not a public document. Richards Bay Coal Terminal declined to comment.

Coal reserves

While South Africa has high quality coal reserves and is well positioned to export the fuel to India and China, shipments are constrained by limited port capacity. Only shareholders have an automatic right to export through Richards Bay, which accounts for almost all of South Africa’s coal shipping capacity. Shareholders in the terminal include Anglo American [JSE:AGL], Glencore [JSE:GLN] and South32 [JSE:S32].

Andrea Schlaepfer, a Vitol spokesperson in London, declined to comment. The Oakbay Group of companies, which is controlled by the Guptas, said it doesn’t comment on market speculation.

On September 2 Gert van der Merwe, a lawyer for a group of companies controlled by the Guptas, said comment on any potential transaction would be inappropriate.

The Guptas and Zuma’s son, Duduzane, bought Optimum through Tegeta Exploration and Resources for R2.15bn from Glencore in December. Optimum also owns two coal mines, which are not part of the assets being considered for sale to Vitol.

READ: Release coal docs at your own peril, Guptas warn Treasury

Vitol has trading and marketing operations in South Africa and its storage unit, VTTI, is building a fuel storage facility in Cape Town. In 2012, it formed a coal-trading company in neighbouring Mozambique by buying a stake in a terminal that exports coal from South African mines.

The Gupta family spent more than two decades building up a South African business empire spanning mining, computers, engineering, a television station and a newspaper as well as a safari lodge. As well as befriending Zuma, they included Duduzane as a shareholder in several of their companies including the firm that acquired Optimum.

They announced that they would sell their South African interests on August 27.

Nazeem Howa, the chief executive officer of their holding company Oakbay Investments, said in a Bloomberg Television interview on August 30 that there has been “tangible” interest from an international investor for the assets. He declined to comment on Vitol’s interest on September 9, saying it was a matter for shareholders.

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