Perdaman, Griffin dispute worsens

The contractual dispute between project developer Perdaman Chemicals & Fertilisers and the the new owner of Griffin Coal has deepened, with Perdaman accusing Griffin of unlawful behavior and rejecting a “good faith” offer regarding their coal supply agreement.

The dispute between the two companies has cast doubt over the viability of Perdaman’s plan to build a $3.5 billion coal-to-urea plant at Collie.

Perdaman signed a 25-year coal supply deal with Griffin, when Griffin was under the control of administrators.

However, the coal miner, which was bought early this year by Indian company Lanco Infratech, said yesterday that it has formally terminated the agreement.

The purported termination followed protracted speculation that Griffin, which wants to increase coal exports, was looking to re-price its domestic sales contracts.

Lanco’s actions have also cast doubt over the future of Griffin Group’s Bluewaters power stations.

A $1.2 billion deal to sell the coal-fired power stations to Japanese interests has not settled, apparently because of uncertainty over the coal supply arrangements.

The latest instalment in the dispute follows court hearings this week over the ability of Lanco to place a charge over its Griffin assets in favour of its main lender, ICICI Bank.

Perdaman claimed in a statement issued today that a formal undertaking by Griffin was equivalent to the court orders Perdaman had been seeking.

It also said that a statement issued by Griffin / Lanco “has the capacity to mislead” because it failed to disclose several matters.

The Griffin / Lanco statement said they had formally terminated the coal supply agreement with Perdaman, as the condition precedent concerning Perdaman's financial close had not been met.

“Griffin Coal has in good faith offered to withdraw this formal termination and to provide Perdaman with additional time until 15 October 2011 to achieve financial close,” it added.

Perdaman responded by stating that Supreme Court Justice Andrew Beech “expressed the view that Griffin could not exercise any power to terminate”.

Perdaman also said that its solicitors, on Sunday, 28 August 2011, “gave formal warning that Griffin had no legal power to purport to terminate the contract”.

“The subsequent offer by Griffin, said by it to be ‘in good faith’ has no legal standing,” Perdaman stated.

Perdaman added that it is continuing with its US$3.387billion legal action against Griffin Coal, Lanco Infratech and related comapnies.

The statements issued by Perdaman today and Lanco last night are pasted in full below:

PERDAMAN WIN IN COURT

PERDAMAN CONSIDERS TERMINATION OF COAL SUPPLY AGREEMENT AS UNLAWFUL

In the Court of Appeal division of the Supreme Court of Western Australia yesterday, Lanco and its wholly owned subsidiary Griffin Coal urged the Supreme Court not to make formal injunction orders (as indicated by Appeal Justice Pullin on Monday, 29 August 2011), saying the effect of the making of such orders “has the potential to have negative implications in India and may adversely affect the reputation of Lanco Infratech Limited both with its shareholder and its financiers”.

In an affidavit provided to the Court of Appeal Lanco and Griffin director Amarendran said “it is possible that the share price of Lanco Infratech Limited will fall upon the making of the orders by Justice Pullin”.

In lieu of orders being made by the Court, Griffin and Lanco offered to the Court of Appeal of the Supreme Court of Western Australia a formal undertaking (enforceable in Australian Courts as the equivalent of an injunction) in the precise terms sought by Perdaman.

The effect of the undertaking is the same as that of a formal injunction order and restrains Griffin Coal from granting security to Lanco’s principal lender ICICI Bank Limited until the hearing of Perdaman’s appeal of the decision by Supreme Court Justice Andrew Beech not to grant a “freezing order”.

In similar conduct, no doubt to arrest or deal with its share price, Lanco yesterday issued a press release purporting to state that it had “formally terminated its Coal Supply Agreement with Perdaman”. The press release by Lanco fails to disclose:

1. That the question of whether or not Griffin Coal had legal power under Australian law to terminate the Coal Supply Agreement was debated on 27 July 2011 before Supreme Court Justice Andrew Beech who expressed the view that Griffin could not exercise any power to terminate.

2. On Sunday, 28 August 2011, Perdaman by its solicitors gave formal warning that Griffin had no legal power to purport to terminate the contract.

3. Immediately upon receipt of the purported notice of termination Perdaman gave notice to Griffin Coal and Lanco that the purported termination was wrongful and a further

breach of the Coal Supply Agreement by Griffin. Perdaman has reserved all of its rights in relation to Griffin’s unlawful conduct.

The Supreme Court of Western Australia has already determined that Perdaman has a good arguable case that:

- Griffin is in breach of the coal supply agreement,

- Lanco and its related entities have interfered with the coal supply agreement, and

- Perdaman has suffered substantial damages.

Without reference to these important matters the press release by Lanco has the capacity to mislead.

In the context of the rejection of Griffin Coal’s purported notice of termination (being a repudiation of its contractual obligations) the subsequent offer by Griffin, said by it to be “in good faith” has no legal standing and Griffin Coal’s purported offer (which is conditional on matters not consistent with the terms of the Coal Supply Agreement) cannot cure Griffin’s further breach of the Coal Supply Agreement.

Perdaman is continuing with its US$3.387billion legal action against:

- Griffin Coal Mining Company Pty Limited

- Lanco Infratech Ltd

- Lanco Resources Australia Pty Ltd

- Lanco Chairman Lagadapati Rao

- Griffin CEO Russell Conley

- Griffin Director Kandimalla Naga Prasad

- Griffin Director Mr Agarwal; and

- Griffin Director Mr Amarendran

Perdaman expects the trial of its action to be listed for hearing by April 2012

Griffin Coal terminates Coal Supply Agreement with Perdaman

Today, Griffin Coal, a subsidiary of Lanco Resources Australia, formally terminated its Coal Supply Agreement (CSA) with Perdaman Chemicals and Fertilisers Pty Ltd (Perdaman) as the condition precedent to the implementation of that CSA concerning Perdaman's Financial Close was not met by Perdaman.  

Griffin Coal has in good faith offered to withdraw this formal termination and to provide Perdaman with additional time until 15 October 2011 to achieve Financial Close including certain terms & conditions in line with the CSA.  This offer is open for acceptance by Perdaman until 6 September 2011.

Ends