ANOTHER HURDLE: WICET faces potential $40m court battle
JUNIOR lenders to Wiggins Island Coal Export Terminal are preparing for a court challenge, reportedly suing the company for $40 million.
It is believed the junior lenders - owners of Wiggins Island Preference Shares - are launching legal action due to unpaid dividends.
The move could derail attempts to refinance WICET's $4.1 billion debt before its September repayment deadline.
The Australian reported that the WIPs argue WICET management should have set the ship-handling charge at a rate that would have allowed the company to meet its payment obligations, including dividend payments to the WIPs.
The ship-handling charge, which rose from $14.16 per tonne in 2016 to $21.83 per tonne in 2017, has been an issue for WICET since it opened mid-2015.
Three of the original eight owners - Bandanna Energy, Caledon Coal and Cockatoo Coal - blamed expensive port handling costs and the take-or-pay agreements at WICET for their collapse and liquidation.
Finance expert and former Citigroup analyst Tim Buckley said the "gold-plated" project was based on "undue optimism" towards coal growth and that miners and bankers involved agreed to expensive, long-term take-or-pay contracts.
He said the asset, which opened in 2015, had about $10,000 in shareholder equity.
The Institute for Energy Economics and Financial Analysis director of finance and energy Australasia said the miners needed to "bite the bullet" and take a multi-million dollar writedown.
"The lenders are taking court action against a bankrupt organisation ... at some point the courts have to rule but what will they rule on?" he said.
"There's multi-billion dollars in losses here, three companies have gone bankrupt already.
"They need to get an ex-court judge or an independent administrator to come in and make everyone accept they need to bite the bullet and the losses need to be divvied out.
"It does need to be resolved at some point."
With five miners remaining - Glencore, New Hope, Aquila Resources, Coronada Curragh and Yancoal - WICET has been unable to claw back lost revenue from the companies that have left the consortium because it has not been operating at full capacity.
It was hoped WICET's financial woes would be solved by Aurizon, as it led a consortium's proposal to buy the facility.
It is unknown if Aurizon is still interested, and yesterday when asked by The Observer, an Aurizon spokesperson declined to comment.
WICET did not respond to The Observer's questions, and said it did not provide comment on financial and other confidential information.