Businessman Vivian Reddy, posing here with his Bentley, faces some tough decisions ahead of the possible liquidation of his company which reportedly owes R80 million.

Durban - A specialist electrical services supplier founded by politically connected businessman Vivian Reddy and which boasts a “successful relationship” with Eskom and municipalities, is under threat of liquidation, with an acknowledged debt of more than R80 million.

The directors of Gauteng-based Edison Jehamo Power – recently renamed EJ Power – say they have a serious cash flow problem and that the bank has called in the company’s overdraft facilities, “freezing” all its bank accounts held at the Durban North branch of First National Bank.

But they are attempting to stave off several winding up applications with a proposal that the company be placed under “supervision” and be allowed to trade its way out of trouble.

Reddy – controversial for his funding of ANC politicians, including President Jacob Zuma, and for the government deals his Edison group of companies have scored – founded EJ Power in 2005 with project manager Russell Broadhead.

A company search shows that Reddy has resigned as a director, but his son Shantan Reddy – his “heir apparent”– is a director along with Broadhead and Simon Wilkinson.

According to various websites, the company has been involved in the erection of power lines throughout SA for Eskom and was involved in a partnership that saw it becoming the first company in Africa to specialise in live-line maintenance using robotic arm technology.

But this year its finances took a turn for the worse.

The first creditor to go to court with a winding up application was Kempston Truck Hire, which said it was owed R1.6 million. This was followed by a similar application by Spartan Truck Hire, which alleged it was owed R1.3m.

Then Babcock Ntuthuko Engineering filed papers alleging a debt of R5.7 million and was recently granted leave to intervene in the two earlier applications.

The Mercury is aware of an application by Aveng Ltd and it has seen documentation relating to R3.5m owed to a KZN-company for work it did on an Eskom project in the Eastern Cape and a project for the eThekwini Municipality. That company says that EJ Power has been paid by Eskom and the municipality, but is refusing to pay on what it owes.

In an affidavit filed with the Johannesburg High Court, Babcock director Ian Whalley expressed concern that EJ Power was attempting to negotiate settlements with other creditors, “preferring some over others”.

He accused the company of “recklessness in playing one creditor off against another”.

“It is imperative that a liquidator seize control of the company before matters are further muddied,” he said.

Babcock set the matter down for Tuesday, but EJ Power did not file full opposing papers.

Instead, on August 16, two of its directors, Broadhead and Wilkinson, asked the court in the name of another company, Power Network Contractors, and in an application also set down for Tuesday, to place the firm under “business rescue”.

In his affidavit, Wilkinson said he and Broadhead were the directors of Power Network Contractors, which owned 33.3 percent of EJ Power.

Power Network, they said, was owed almost R300 000 by EJ Power for the “letting of equipment”.

Wilkinson blamed the company’s financial woes on failed “joint venture agreements”, specifically with Indian-based KEC International, and on the bank’s having called in its overdraft in April.

However, he said, creditors would be better off if the company was allowed to trade its way out of trouble than if it was liquidated.

He said that at present, the company owed banks R18m, the taxman and employees almost R10m, and “concurrent creditors” (subcontractors and service providers) R55m.

He said the company had R46m in assets.

Under a business rescue plan, the banks and the staff would be paid in full and the concurrent creditors would be repaid over 12 months, getting back between 70 cents and 100 cents in the rand. - The Mercury