BTU acquisition of Meiya - Lessons in how a Private Equity group makes a $220 million purchase while having only $100 million (actually, BTU never mentions this but the price was $236 million)

THE STORY

An inauspicious start to the BTU involvement with Meiya.  It agreed to acquire Meiya for $220 million but ended up paying $236 million and had to BORROW $136 million from the SELLER to conclude the transaction. BTU is given three months to pay the loan but at some point BTU asks the SELLER for an extra month to come up with the remaining $99 million owed to the SELLER.  Subsequently, it BORROWS $105 million from a consortium of banks to pay the remaining $99 million. BTU is NEVER able to "take out" the loan. Throughout its entire life, the Meiya investment gets saddled with the debt and its costs and risks.

The Middle East investors that actually come up with the money for the purchase believe they bought Meiya for $220 million.  Abdulmohsen Hayat, the 44% owner of BTU Holdings, believes that Meiya was acquired for $220 million.  The BTU Ventures website announces the $220 million acquisition. Wael Al-Mazeedi is SILENT regarding the price in two of his affidavits filed in Massachusetts courts. 

Simple math. Price tag as told to EVERYBODY by BTU - monies actually received by PSEG - Cost of not having all the money required to complete the purchase in the first place = $220 million - $236 million - ($105 million - $99 million) =  -$21 million.

BTU HOLDINGS COMPANY was placed in VOLUNTARY LIQUIDATION on January 27, 2011. The Grand Court of the Cayman Islands issued an Order (on February 24, 2011) for the liquidation to be continued under the Supervision of the Court because BTU HOLDINGS COMPANY could not show that it was solvent.

from E&Y website: 2006 Entrepreneur of the Year

Almazeedi's "Founder's Statement" in the new btupower.com Website 

sometime mid-February 2011

"As the BTU Companies continue to successfully execute our business plan, I am pleased to update you on recent and positive developments in our efforts to protect the value of our assets for the benefit of all our investors."

• BTU HOLDINGS COMPANY went into Voluntary Liquidation on January 27, 2011  [see page 335]

28 days later...

• BTU HOLDINGS COMPANY's liquidation was Ordered to continue under the Supervision of the Court in accordance with Section 124 of the Companies Law (2010 Revision) on February 24, 2011 (28 days after filing for Voluntary Liquidation).  [see page 470]

Observation

Based on the excerpt form the Cayman Island Companies Law, if BTU HOLDINGS COMPANY could have shown that it was SOLVENT, it could have continued under Voluntary Liquidation


Cayman Islands: Companies Law (2010) Revision
124. (1) Where a company is being wound up voluntarily its liquidator shall apply to the Court for an order that the liquidation continue under the supervision of the Court unless, within twenty-eight days of the commencement of the liquidation, the directors have signed a declaration of solvency in the prescribed form in accordance with subsection (2).

Conclusion

The "parent" company of BTU Ventures Inc., BTU Power Management, BTU Power Company, etc. is "broke."  This little bit of information did not make it's way into the Founder's Statement for btupowercompany.com (perhaps Almazeedi will update that website soon.  Maybe he'll return his E&Y Entrepreneur of the Year award as well.)

So, what are these "recent and positive developments" that he was talking about in btupower.com - maybe he was talking about them from HIS perspective... they are positive for HIM.

BTU HOLDINGS COMPANY, the "parent" company of BTU Ventures Inc., BTU Power Management, BTU Power Company, etc. is IN OFFICIAL LIQUIDATION (see post immediately below for a corporate structure diagram of the BTU Group)

link: Cayman Islands Gazette - Extraordinary Gazette Issue 26 - Commercial Liquidation Notices - Tuesday, 29 March 2011 [see page 3]

BTU HOLDINGS COMPANY 

(In Official Liquidation) 

(“The Company”) 

The Companies Law 

Notice of Creditors’ Meeting (O.8, R.2) 

Grand Court Cause No. 35 of 2011 

Registration No. 125586 

NOTICE IS HEREBY GIVEN THAT the first meeting of the creditors of the above Company will be held by telephone conference from the offices of KPMG, 2nd Floor, Century Yard, Cricket Square, Grand Cayman, Cayman Islands at 10:00am Cayman time on 13th April 2011, on international access number 1(281) 319-9872 or US access number 1(866) 212-4398, participant passcode: 5302584637#.

In order to be eligible to attend this meeting each creditor is required to have submitted a Proof of Debt and have sent written notice of his/her intention to attend to the Joint Official Liquidators, contact Lea Kuflik on lkuflik@kpmg.ky by close of business on 11th April 2011. Should any creditor wish to submit a claim against the Company, please email Lea Kuflik on the above email address to receive a Proof of Debt Form in accordance with the Companies Winding Up Rules 2010.

Dated this 28th day of March 2011.

S WHICKER 

Joint Official Liquidator 

The address of the Official Liquidators is: PO Box 493, Grand Cayman KY1-1106 Cayman Islands
Contact for enquiries:
Ms Lea Kuflik
Telephone: 345-815-2601
Facsimile: 345-949-7164
Email: lkuflik@kpmg.ky

Address for service:
P.O. Box 493, Grand Cayman KY1-1106 Cayman Islands
Telephone: 345-949-4800
Facsimile: 345-949-7164

link: Gazette Office - Cayman Islands Government

link: BTU HOLDINGS COMPANY - Certificate of Incorporation
link: BTU HOLDINGS COMPANY - Register of Members
link: BTU HOLDINGS COMPANY - Register of Directors and Officers

from the Hayat litigation Appeals Court decision

FN1. According to Hayat's affidavit '[t]he BTU group companies are a fully integrated whole with each serving BTU Holdings.' Subsidiaries include BTU Power Company (BTU Power), a Cayman Islands corporation controlled by BTU Power Management (Power Management), a Cayman Islands corporation with its principal offices in the United Arab Emirates. Al-Mazeedi is the sole director of Power Management. BTU Ventures provides services to BTU Power on a contract basis on behalf of BTU Holdings and is incorporated under the laws of Delaware with its principal place of business in Massachusetts.

Detailed BTU Group structure. Also, Wael Al-Mazeedi's and Mitsue Oishi's multitude of companies that seemingly do the same thing: The "specious" Track Record

The "Original BTU"

The following is a detailed "BTU" structure chart based on information available in the public domain.  It has been distilled from court filings, BTU Power Company Offering Memorandum, post in this blog (which are based on public domain information), and multiple websites.

Hopefully it will help navigate the multitude of disparate operating and shell companies that are part of Almazeedi's "business empire." 

The "BTU" in the following structure chart is the "original" one.  That is, it is the one where Hayat is 44% owner.  As Hayat himself explains in his Verified Amended Complaint:

"...Hayat has learned that certain entities — also named BTU and related to the energy industry — were formed by Defendants without Hayat's knowledge. In violation of the Defendants' duties of loyalty to Hayat and Holdings, such entities are not owned or controlled by the parent company, Holdings, and are not managed by entities in which Holdings has any ownership stake."

*** CLICK CHART to Expand to FULL Size ***

More on the "Other BTU"

At some point Al-Mazeedi began to form other entities under the BTU name that have no connection to the "Original BTU" (other than the fact that, on paper, Almazeedi owns shares in the separate entities).  He refers to that hodgepodge of BTU entities as "affiliates" in most of his public pronouncements.  On that basis, if someone owns shares in General Electric and Walmart, they could claim that those two completely separate companies are "affiliates" as well.

As Hayat further explains in his Verified Amended Complaint, "After freezing out Hayat, Al-Mazeedi and Oishi began to form their own parallel set of companies that had no subsidiary relationship to Holdings, to carry out the business of the BTU Group."

• BTU Industries, Ltd. (Caymans) 
• BTU Industries Holdings Limited (Cayman) 
• BTU Industries Holdings (USA) Inc. (Delaware)

"Hayat does not hold shares in any of these entities."

The "Other Almazeedi and Oishi Companies"

Although they are self-proclaimed "major industry players" not much information is available regarding the newest set of companies formed by Al-Mazeedi and Oishi, and headed principally by Al-Mazeedi.  The only descriptive information available on the web consists almost exclusively of press releases that undoubtedly originate with Al-Mazeedi.

• QGEN Ltd. (Caymans)
• QGEN (USA), Inc. (Delaware)
• The only external "news" link in QGEN's website references the QGEN website exclusively to support its statements.  Seemingly NO independent research or reporting was done in the linked article.
• FATE Consortium 
• No idea if this is a real corporate entity.  At least in Massachusetts it isn't - it's not registered with the Massachusetts Secretary of the Commonwealth.

The "Track Record" and a Conclusion

This topic has already been discussed at length elsewhere in the blog, particularly in the section titled "What is QGEN."  Al-Mazeedi makes numerous claims regarding the "Track Record" of QGEN (recently) and BTU Industries (previously).  It's pretty clear by now that the only entity that owns ownership interest in power plants of any kind, hybrid or conventional, is BTU Power Company.  However, you can not draw a direct CONNECTION whatsoever between BTU Power Company and any of the other Almazeedi and Oishi companies.

Information Sources

Material Extracts from BPU Power Company Offering Memorandum

BTU structure chart sources list (references from court filings)

CPC website

TAPCO website
BTU Group website

The first of Al-Mazeedi's litigation salvos: the lawsuit filed against Mr. Hayat in the Caymans (original: September 27, 2007)

Among the many documents submitted in support of various motions in Massachusetts and Cayman Islands courts there are exhibits that contain correspondence, corporate documentation, summary financials, etc.  When viewed in the wider context of ALL litigation involving Mr. Al-Mazeedi these exhibits not only inform but also elucidate.  The following email from Mr. Al-Mazeedi to Mr. Hayat (in which he offers essentially NOTHING - beyond the fee that he was already receiving for having brought in the $290 million - for his 44% ownership of BTU Holdings Company) underscores a particular modus operandi of Mr. Al-Mazeedi (and Ms. Oishi).

Note: links to the principal filings in the Caymans litigation are found at the bottom of this post.

2006

Al-Mazeedi describes how much the personal and family relationship he's developed with Hayat means to him.

"However, due to the personal and family relationship we both have and which I, in particular, value..."

 link: Wael Al-Mazeedi "offer" to Mohsen Hayat for his 44% interest in BTU Holdings Company

2007

Al-Mazeedi sues Hayat in the Caymans

Tactical and abusive nature of the Writ  [from Hayat's Defence and Counterclaims] 

2. Mr. Hayat's contacts and business expertise were crucial to the successful formation and funding of the BTU Group. But for Mr. Hayat's considerable endeavours there would have be no prospect of the BTU Group developing past its start-up phase. The subsequent growth in value of the BTU Group was as a direct result of Mr. Hayat's services, particularly in respect of the negotiations which led to the provision of funding under the Evolvence Agreement.

3. The BTU Group was from the beginning intended to operate as a quasi-partnership, drawing and developing upon the respective skills and contacts of the main shareholders. Unfortunately having benefited from Mr. Hayat's work, the other beneficial owners, namely Mr. Mazeedi and his wife, Ms. Mitsue Oishi (together "the Mazeedis"), increasingly sought to exclude Mr. Hayat from the participating in the management of the BTU group and have sought inter alia to improperly divert maturing business opportunities to other companies which are not part of the BTU group, (although these are improperly trading in the style "BTU").

4. This Writ forms part of the break-down of the relationship between Mr. Mazeedi and Mr. Hayat. Worse still it forms part of transparent attempt to obtain a perceived tactical advantage in the wider dispute between the parties, based upon allegations which the Mazeedis know to be without merit or foundation.

5. No notice of this Writ was provided to Mr. Hayat by BTU, despite the fact that certain allegations made related to conduct which took place more the 4 years previously, and of which no complaint was made in the intervening period.

link: Amended Writ of Summons
link: Defence and Counterclaim
link: Reply to Defence and Counterclaim

Aref Kooheji, former CEO of Dubai Islamic Bank Investment Banking Group, describes the genesis of BTU in an article titled: "Marrying capital with opportunities | ISLAMIC PRIVATE EQUITY | CPI Financial" (May 2006)

Background

Something incongruous in this article regarding the description of the role of the Dubai Islamic Bank in the creation of BTU.  The references made below to the "first fund" and "second fund" appear to be BTU Power and BTU Power II, respectively.  When read together with the post immediately following this one a rather murky picture emerges.

Note: Two things to keep in mind while reading the article immediately below; 1) the photograph in the article does not match other images of Mr. Kooheji found elsewhere in the internet, and 2) there are many references to Mr. Kooheji throughout the web before his departure from DIB - there are almost no references to Mr. Kooheji throughout the web after his departure from DIB - he drops off the radar.  

"Dubai Islamic Bank is no stranger to investment banking, having been one of the region's leading players for some time, Islamic or conventional, and has recently announced plans for a $5 billion family of private equity funds. AREF KOOHEJI, the CEO of the Investment Banking Group, spoke to Robin Wigglesworth about the opportunities of emerging markets."

Note: The reference to BTU is found in the 11th Question and Answer section of the interview. 

"No,  we started out with one private equity fund, BTU. A few years ago, as everyone knows, Enron went through a lot problems, and as a result a lot of large power companies started to sell some of their international exposure and focus on their home markets, whether they were US, Dutch or German.

As acquiring all these assets would be beyond any one company or bank, I thought we could establish a fund, where we could take up strategic stakes in these companies.

BTU Ventures, QGEN and ELMED: why tell the US Government, the US Federal Courts, and the Tunisian Government different stories?

All we know about QGEN comes from their own press release and 3-page website. Doing a bit more research, we see other "reflections" of QGEN and its "business" from information provided to, and subsequently published/used by, US government agencies, Tunisian government agencies, and US Federal courts.

Evolvence and the Hayat Litigation - consequential contradictions in Wael Al-Mazeedi's statements and actions - re: Mr. Khaled Al Muhairy

An interesting dichotomy is seemingly at work regarding the impetus for Wael Al-Mazeedi's actions vis-à-vis the litigation with Abdulmohsen Hayat. At the very least, some interesting questions are raised by statements and disclosures made in the various documents discussed below.

BTU Power Company (chronologically, 1st of the ONLY 2 assets still exiting in their portfolio): PSEG Global Sale of CPC to BTU Power Company - May 21, 2004

"PSEG Global, along with its current partner, Marubeni Corporation, and former partner, Sithe Energy, built the Rades (II) plant with construction completed in May of 2002."

 "In May 2004, Global completed the sale of CPC for approximately $43 million in cash."

Comment: Based on the information contained in the following sources, BTU Power Company owns 60% of CPC's 471 MW (equaling, 283 MW)

Link: PSEG sale of Carthage Power Company to BTU Power Company (including excerpt from PSEG Securities and Exchange Commission - SEC - 10K filing)

BTU Power Company (chronologically, 2nd of the ONLY 2 assets still existing in their portfolio): Acquisition of stake in Taweelah Asia Power Company - April 25, 2005

BTU Power Company's investment in Taweelah Asia Power Company (TAPCO) is described in the BTU Ventures website in the following way:

"BTU has a 25% equity interest in the consortium and has committed to provide equity funding to the project totaling $75 million."  Furthermore, the consortium is described as owning 40% of TAPCO, while the Abu Dhabi Water and Electricity Authority (ADWEA) own 60% of TAPCO.

Comment: By simple calculation, BTU Power Company owns 25% of the the consortium's 40% stake in TAPCO.  Meaning, it owns a net 10% interest in a 2,000 MW project (equaling, 200 MW).
Link: all this information can be found in btuventures.com
Link: Taweelah Asia Power Company website - About Us - Sponsors

Comment: As the link to the TAPCO website shows, the consortium's ownership of TAPCO is broken down as follows:

• Marubeni: 35%
• BTU Power: 25%
• Powertek BHD: 25%
• JGC: 15%

BTU Power Company II (chronologically, irrelevant since it was DISPOSED over 3 years ago): PSEG Sale of MPC to BTU Power Company - October 4, 2004

Public Service Enterprise Group (PSEG) and BTU Power Compay (BTU) announced today (October 4) the signing of an agreement for BTU to purchase from PSEG Global its 50% equity interest in Meiya Power Company Limited (MPC).  BTU will pay approximately $220 million for the shares,.....

"PSEG Global is proud of its role in starting and expanding MPC and establishing it as one of the most successful independent power companies in Asia," said Robert Dougherty, president of PSEG Energy Holdings, Global's immediate parent company.

Link: PSEG sale of Meiya Power Company to BTU Power Company

Who really "won" the TAPCO project: Marubeni Wins Power and Water Project in Abu Dhabi... (January 5, 2005)

"Marubeni Corporation, in cooperation with JGC Corporation, BTU Power Company of the United States and Powertek Berhad of Malaysia, has successfully won the right to own, operate and expand the 20-year Taweelah B power and water project in the Emirate of Abu Dhabi in the United Arab Emirates ('UAE')."

Link: Marubeni Wins Power and Water Project in Abu Dhabi World-Leading Scale with Total Investment of USD 3 Billion News Release Marubeni Corporation:

Again, who really "won" TAPCO: Japanese Marubeni Corporation says that the group it leads has won a US $3 billion power generation and desalination project in Abu Dhabi (January 15, 2005)

"Marubeni formed a consortium with Japanese engineering firm JGC Corp., BTU Power Co. of the US and Malaysian power producer PowerTeck Bhd, to compete for the deal"

Link: Marubeni-led consortium wins US $3 billion power deal - ArabianBusiness.com:

BTU Industries' sponsorship of the of U.S.-Arab Economic Forum

"BTU Industries is a global developer, owner and operator of independent power and desalination plants and a venture capital investor in renewable energy technologies."

Link: Strategic Partners