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This article first appeared in The Edge Malaysia Weekly on March 26, 2018 - April 1, 2018

A US$200 million tugboat contract that has turned acrimonious has put Brazilian mining giant, Vale SA, and a couple of local corporate personalities in the spotlight.

The local parties involved are heavyweights. On one side is American national of Afghan descent, Datuk Seri Timor Shah Rafiq, who is supposedly linked to royalty, while on the other side is Azimuth Marine Sdn Bhd and its units.

Azimuth’s shareholders include Datuk Ahmad Johari Razak, who is Prime Minister Datuk Seri Najib Razak’s brother, and Datuk Seri Suresh Emmanuel Abishegam, a seasoned shipping personality. Ahmad Johari holds a direct 25% stake in Azimuth while Suresh and his family, via East India Shipping Corp Sdn Bhd, hold the remaining 75%.

To recap, Vale operates a US$1.4 billion iron ore distribution centre and a palletising plant in Teluk Rubiah, Perak, which is capable of churning out 30 million tonnes of iron ore pellets a year. In a nutshell, large quantities of iron ore are imported from Brazil, converted into pellets here and distributed.

The tugboat contract in question involves assisting Vale’s Valemax vessels berth at the jetty in Teluk Rubiah.

The Edge understands that there are at least nine ongoing suits, and claims and counter-claims at various levels in the courts.

When contacted, Vale’s Malaysia country manager, Fabiano Burns, says, “I have nothing to comment on the matter.”

When approached in court, Timor and Suresh did not want to comment either. Timor said, “Let the [court] process go on”, while Suresh said, “It is sub judice to comment”.

According to sources, attempts at an out-of-court settlement recently fell through.

 

The fight

To recap, Timor, in partnership with Ahmad Johari and Suresh, set up Nautilus Tug and Towage Sdn Bhd (NTT), in which he held 20% equity interest and Azimuth held the rest. NTT was awarded the tugboat contract by Vale.

Originally, Vale was to own the tugboats to handle its Valemax vessels, which are very large ore carriers that weigh 400,000 deadweight tonnes.

However, after a change of policy at Vale, Azimuth ended up with the mandate to not only manage the tugboats but also to obtain the financing to acquire them for NTT.

The 15-year tugboat contract was worth US$200 million or about RM800 million at present. When it was entered into, its value was about RM900 million.

Azimuth, via Exim Bank Bhd, managed to secure 80% funding or US$50 million to build seven tugboats with 85 bollard pull capacity, which is more than double that of regular tugboats found in Malaysian waters.

According to court documents, the issues revolve around Azimuth transferring a 10% stake in NTT to businessman Jaya Sudhir Jayaram and Azimuth’s opposition to certain payments — a daily fee agreement and an advisory fee agreement — sought by some of the parties involved.

This brought about much of the current legal wrangling with both parties looking to buy each other out, thus creating more tension as the value of NTT is also in dispute.

Sources say Azimuth appointed auditors who valued NTT at between US$60 million and US$70 million. However, Timor’s auditors used net tangible asset valuation and have taken the stand that without the US$200 million Vale contract, NTT is worth a negligible amount as the assets, largely the tugboats, are depreciating assets.

NTT still has 11 years left on the contract.

While these disputes were playing out, Timor sought to inspect NTT’s accounts utilising Section 167 of the Companies Act 1965, which allows a director to look at a company’s books. But this irked Azimuth’s management, which claimed that operations were disrupted.

The Azimuth camp — Ahmad Johari and Suresh — claim that in exercising Section 167 of the Companies Act, Timor, a minority shareholder, had disrupted and pressured the company.

Sources familiar with the matter say the outcome of the Section 167 investigation is still pending after a year.

 

About the parties

Suresh has been involved in shipping for more than 25 years and is a well-known personality in the industry.

Ahmad Johari, meanwhile, is a familiar corporate player and is an executive director of Ancom Bhd and chairman of Daiman Development Bhd. He also sits on the boards of Hong Leong Industries Bhd and Deutsche Bank Malaysia Bhd.

Court documents indicate that the company that negotiated the tugboat contract with Vale is Dwitasek Ventures Sdn Bhd.

A check with RAM Credit Information shows that Dwitasek Ventures is wholly owned by Dwitasek Sdn Bhd, which, in turn, is owned by Desa Medina Sdn Bhd (52.14%) and Safina Resources Sdn Bhd (47.86%).

With the dispute dragging on for about a year now, it is unclear if the tugboat services are running smoothly or if Vale has been affected in any way.

 

 

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