WND sued by major shareholder
Western Wind sued by Pacific Hydro
2006-11-07 16:58 ET - Street Wire
by Mike Caswell
Pacific Hydro International Pty. Ltd., an unhappy shareholder of Jeffrey Ciachurski's Western Wind Energy Corp., is suing the company for half of its Mesa wind project in California. Pacific Hydro says it agreed to finance the acquisition of the wind farm, but Western Wind has not lived up to the terms of the deal.
According to a nine-page lawsuit, made public in B.C. Supreme Court Monday, Pacific Hydro provided a temporary $13.4-million loan so the company could buy the California wind farm, but it has not received convertible shares provided for in the deal. The terms of the agreement apparently called for Western Wind to repay the loan with $7-million in common shares and $6.4-million in convertible preferred shares, upon shareholder approval. (All figures are in U.S. dollars.)
The $7-million part went fine, it seems, but Pacific Hydro's problem is with the $6.4-million in convertible preferred shares. Apparently they are not convertible. "The preference shares approved by the shareholders are only described as redeemable and exclude the required convertibility to common shares," the lawsuit reads.
At a Sept. 26 shareholders meeting to approve the shares, Pacific Hydro says it demanded Western Wind clarify the terms of the preferreds, because its information circular said nothing of the conversion terms. Evidently it is not happy with the reply, that the preferreds "were consistent with the agreements between WWE and Pacific Hydro."
Pacific Hydro, which owns 25.2 per cent of the company from earlier investments, says it could not vote against the agreement because it is a party to the deal.
To remedy the situation, Pacific Hydro wants half of the Mesa wind farm. Evidently one of the deal's terms was that Pacific Hydro could claim 50 per cent of the California project if it did not get its convertible shares. The clause was put into the agreement in case shareholders did not approve the issue.
Pacific Hydro says it asked Western Wind to sign over half of the project's holding company by Oct. 27. "WWE failed or neglected to transfer 50% of the shares to Pacific Hydro as required under [the loan agreement]," the lawsuit reads.
Pacific Hydro is asking the court to award it 50 per cent of the project if the loan is not repaid by Dec. 31, 2006. It concludes its claim asking for costs and damages.
The lawsuit comes a week after Western Wind issued a news release complaining Pacific Hydro had threatened to seize major assets of the company. "Without shareholder and other applicable approvals, such acts to seize, convert and encumber assets of a reporting issuer by an insider, related party and control person are serious contraventions of the Securities Act in Canada and the United States," the company said.
The company also complained Pacific Hydro was trying to take assets for its own use, to the detriment of minority shareholders.
Pacific Hydro's allegations have not been proven in court, and Western Wind has not filed a statement of defence.