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.

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

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.

Interesting stories below: there is one common name (Aref Kooheji) in this article and the one immediately preceding

June 30, 2008

"The lawsuit reads like a John le Carre novel full of international intrigue with allegations of torture, an enforced disappearance, involuntary servitude and a secret police force called Amn Al Dawla."

"The lawsuit claims Aref Kooheji, a former employee of a DIB subsidiary, told Usmani, 'We will take the skin off your body and throw you in jail forever.' Kooheji allegedly warned Usmani the Dubai government could jail anyone without charges or evidence."

Link: Law.com - Banker Detained in Dubai Claims in Suit That He Was Tortured:

BTU Power Company and BTU Power Company II investors: Dubai Islamic Bank, et al.

All the cash, and some of the debt, for the acquisition of Carthage Power Company, Taweelah Asia Power Company, and Meiya Power Company has come from Middle East investors. They are identified as the holders of Class A shares. Wael Almazeedi refers to these as the "preference shares." The appellation, however, is seemingly a misnomer. The IFIC lawsuit mentions that BTU Power Management (the "Manager") was the owner of "the sole Class B voting share of the Fund." The 3rd Al-Mazeedi affidavit makes clear that Al-Mazeedi was the sole director of the Manager as well as the Fund. In other words, he had ABSOLUTE control.

Al-Mazeedi's affidavits mention the following investors: