Group Five accused of being untruthful to shareholders
PRETORIA – Listed Group Five has been accused of being untruthful to shareholders in claiming last month that it would complete its troublesome $410 million Kpone power plant in Ghana by the end of that month.
This has emerged in papers in the South Gauteng High Court interdict application launched by Group Five Power International to prevent Cenpower Generation Company, the client, from claiming $62.7m in delay damages from HSBC Bank and Standard Chartered Bank, Group Five’s bank guarantee providers.
Group Five has denied it was untruthful.
The interdict application was heard last week and postponed for judgment.
A letter from Group Five to Cenpower in the court papers contains a schedule for the completion of the project and indicates the commissioning of the plant would be completed on January 12 2019 and “substantial completion” of the project by February 11 2019.
Themba Mosai, the group chief executive of Group Five, said at the group’s annual financial results presentation last month that the expected completion date of the contract had been moved to the end of the month.
The Kpone contract accounted for R1.299 billion of Group Five’s R1.4bn operating loss in the year to June.
Elizabeth Taylor, the director of legal and corporate affairs at Cenpower, said in an affidavit that while Group Five was publicly stating that work would be finished by the end of October, it was simultaneously alleging to Cenpower it would only be capable of completing the work in February next year.
“Cenpower concluded, and I believe, that Group Five could not truthfully assert to the market that it would finish the project by the end of October 2018, and in the same month assert to Cenpower that, with due expedition and without further delay, it would be able to complete the works only by February 11, 2019, some four months later,” she said.
Taylor said that if the project was completed by Group Five on February 11 next year, it would be 516 days in delay and 303 days of delay beyond the date on which the cap for delay damages was reached. Group Five said last week that the final commissioning phase of the Kpone plant could currently not be completed, with the key delay now due to the contamination of the fuel being provided to the group by Cenpower, with the provision of fuel the client’s responsibility.
Mosai said yesterday that the effect and delay associated with the contamination issue was notified to Cenpower on October 25 this year subsequent to Group Five releasing its results.
He said contamination was detected for the first time on September 30 and it became evident in subsequent investigations it would delay the project further and hence the notification of claim to the client. “At the time of releasing our results, we were unaware of the impact of the contamination,” he said.
Mosai said that when Group Five announced its results on October 2, it merely had the gas turbine filters blocking due to a sludge presence and at that stage was investigating this matter to establish its severity and impact.
"During the month of October, investigations were carried out and as soon as we established the severity, the impact and confirmation that the contamination was ongoing and was indeed going to cause a delay to commissioning, we released a SENS [Stock Exchange News Service] announcement on 6 November.
"At no point did we not communicate the facts to the market," he said.
Andre Visser, the general manager issuer regulation at the JSE, said if the JSE determined that information provided by a company was false and it was price sensitive, it would instruct the company to correct the disclosure.
Visser said any other action that may be taken by the JSE, in terms of the listing requirements, would depend on the nature of the issue and the specific facts and circumstances.
“False statements are also more broadly dealt with in terms of Section 81 of the Financial Markets Act. This is an area where the Financial Sector Conduct Authority would also be involved in,” he said.
It emerged in the court papers that Group Five was in dispute with Worley Parsons, one of its sub contractors on the Kpone contract.