IG Power (Callide) - Case Update

The Federal Court has ruled that the administrators of IG Power (Callide) (IGPC) can sell the company’s substantive asset — its 50% interest in a joint venture with Callide Energy Pty Ltd (CEPL), a company ultimately controlled by the State of Queensland — without engaging CEPL’s pre-emption rights under the joint venture agreement (JVA) between the parties.

IGPC operates the Callide C power plant at the Callide Power Station through a JVA with CEPL. The company entered voluntary administration in March 2023 following two catastrophic incidents at the power station - the explosion of a turbine in May 2021 and the partial collapse of a cooling tower in October 2022.

The administrators have undertaken a sale process which has resulted in a number of non-binding indicative offers being received. The administrators, wishing to enter into a binding agreement, corresponded with CEPL as to the construction of certain pre-emption clauses contained in the JVA. CEPL took the position that any proposed sale triggered its pre-emption rights, and the administrators sought advice from the Court as to whether a sale would require compliance with the pre-emptive rights clauses contained in the JVA.

The Court ruled that CEPL’s pre-emption rights were not triggered, finding that IG Power Holdings (IGPH) nor IG Energy Holdings (IGEH), the parties technically disposing of the relevant controlling interest, were not parties to the JVA and had not agreed to be bound by it. The Court stated that in agreements of this nature, it might be commonplace for there to be a covenant by IGPC to secure an agreement from its related companies to be bound by the terms of the pre-emption clauses, however, no such provision appeared in the JVA.

In addition, there was insufficient evidence to conclude that the parties intended to create an agency relationship whereby IGPC acted as the agent of IGPH or IGEH when entering into the JVA so as to bind either to any obligations in it.

As a result, the Court concluded that there was no reason not to give the directions sought by the administrators.

The decision can be found here.

Counsel for the administrators (John Park and Benjamin Campbell of FTI Consulting): Dr Ruth Higgins SC with Ryan Jameson of Banco Chambers

Solicitor for the administrators: White & Case

Consultant for the administrators: Houlihan Lokey

Counsel for CEPL: Peter Brereton SC of Banco Chambers with Stewart Webster of Level Twenty Seven Chambers

Solicitor for CEPL: Clayton Utz