The Story of Marubeni/Kazatomprom Deal. Part 6

We are continuing the story of foreign investors arriving in the Kazakh uranium extraction industry – Japan’s Marubeni Corporation and much less known offshore Swinton Investment and Finance S.A. registered in the British Virgin Islands.

In our previous article published on July 8 and titled «The Story of Marubeni-Kazatomprom Deal. Part 5», we relate how, after Mukhtar Dzhakishev was fired from the post of the President of NAK Kazatomprom and arrested, the new top executives of the national company had to (unsuccessfully) try and find out from the Japanese investor what the latter’s offshore partner was. 

For instance, at the meeting held on July 7, 2009 in the conference-hall of the Kazatomprom office, Sergey Alexeyevich Yashin (at the time, the Deputy Chairman of the NAK Kazatomprom Management Board), asked his vis-à-vis a series of questions and received some shocking answers.

In our opinion, the crucial ones were:

1) that Marubeni Corporation knew nothing about companies Swinton Investment and Finance S.A. and Glendale International Investment LTD, both officially and unofficially; 

2) that the shares Marubeni Corporation bought in 2006-2007 were now owned by “a consortium of Japanese companies.  Marubeni owned 30%, Tepko – 30%, Toshiba – 30%, Chubu Electric – 10%, Tohoku Electric – 5%, Kyushu – 2.5%”;

3) that, according to the shareholders’ agreement, “the Japanese side (EAHL) had no obligations regarding the funding if EAL receives a funding request” which means that “Glendale is responsible for providing additional funding”;

4) at the same time, if Glendale International Investment LTD did not provide the funding, it had to be done by NAK Kazatomprom because “Glendale is a dummy company with no financial resources. KAP has guaranteed the terms of the Shareholders’ Agreement that stipulates that Glendale is obligated to provide additional funding and KAP has provided a guarantee in the amount of approximately US$400 mln in accordance with [the Guarantee Agreement]”; 

5) the main reason why Marubeni Corporation agreed to Mukhtar Dzakishev’s harsh conditions with lots of underlying subcurrents was “the Guarantee Agreement that provided that the Japanese (shareholders) were under no obligation to provide additional funding. In other words, the fact that we were not obligated to provide additional funding served as the condition upon which we agreed to pay US$540 mln and it is all related”.

We at believe that, had Mukhtar Dzhakishev not been fired from the post of NAK Kazatomprom’s President, the scheme of bringing a big foreign investor (Marubeni Corporation) paired with unknown offshore Swinton Investment and Finance S.A.  into the Kazakh uranium extraction industry might have worked. And the people who were behind the latter could have made a lot of money amounting to tens of millions of dollars a year without lifting a finger. 

Unfortunately, here we find ourselves in the position tea-leaves readers. The thing is that the Kyzylkum LLP and Baiken-U LLP shares sale transaction was, without a doubt, sanctioned by the First President of the Republic of Kazakhstan Nursultan Nazarbayev.

We have no written proof of this; however, we can confirm it by the fact that all the state agencies including the NAK Kazatomprom Board of Directors, the relevant ministry, the Kazakh government and the presidential administration did not object. As you know, in Kazakhstan, it only happened in the case when the approval was given at the very top of the power pyramid.

In view of this, the question arises – why, in 2006, Nursultan Nazarbayev agreed to a part of the country’s national wealth being handed to an offshore company for free while, in 2009, he de-facto stripped the latter of the opportunity to make profit from extracting and selling the Kazakh uranium?

At this point, we leave this question open and continue releasing the documents.

This time, we present a translation of the minutes of the meeting held on July 9, 2009 in the conference-hall of the NAK Kazatomprom office.

You will recall that this is an unofficial translation and the scan that we have in our possession is of a poor quality, therefore, we apologize for the possible mistakes (not ours) in the surnames and the names of the meeting participants. Text in bold – by

“Yashin: At our latest meeting, we have discussed the three agreements related to the KAP deal (the Subscription Agreement or the Share Purchase Agreement between Marubeni and Swinton, the Shareholders’ Agreement between EAHL and Glendale as well as the Guarantee Agreement between Marubeni and KAP). And now I would like you to explain the essence of these agreements. Who signed them, what was the background? Was the Shareholders’ Agreement signed first?

ФуджиThe negotiations regarding the three agreements were conducted simultaneously. They were all in one set. And the negotiations had always been handled by Tsotsotia.   

Yashin: So, all the three agreements were signed at the same time?

ФуджиThat is correct.

Yashin: Could you explain the gist of the agreements? 

ФуджиThe Share Purchase Agreement stipulated that Marubeni would purchase 50% of the EAL shares or, to be precise, 100% percentage ownership in EAHL (that owns 50% of EAL) for US$540 mln via a single transaction. The sum we paid to Swinton on January 30, 2007, was paid to KAP through EAL on the same day. We received a letter from KAP confirming the receipt of US$540 mln and the details of the transaction are registered in KAP’s 2007 audit report.

Yahin: OK. By the way, the Share Purchase Agreement between Marubeni and Swinton [remains in force] even without the KAP Guarantee Agreement (i.e. is the Share Purchase Agreement an independent agreement?)

Фуджи: It would be but Marubeni would not have signed the Agreement with Swinton without the Guarantee Agreement. Swinton has an offshore shell-company and, as you understand, no one would sign a US$540 mln agreement with such company, would they?

Yashin: Do you know anything about Swinton?

Фуджи: No, we do not. 

Yashin But Tsotsoria told you that Swinton was controlled by KAP?

ФуджиExactly. We were planning to purchase the shares (20% of Kyzylkum and 47.5% of Baiken-U) but KAP suddenly suggested that structure. We told them that the structure would be an issue for us tax-wise and we would not be able to purchase the shares through the scheme in which an unknown offshore company acted as a partner.

Then the idea came that KAP should serve as the guarantor for the whole transaction. This would guarantee that Marubeni could purchase its share if we pay money that Swinton and Glendale were controlled by KAP. We believe that Swinton, Glendale and KAP are one and the same in this and further events.  

In addition to the fact that KAP paid for all the production expenses – to give you an example – we had to obtain an EAL letter of attorney in order to execute Marubeni’s rights as EAL’s representative and we had to obtain KAP’s confirmation in order to obtain the letter of attorney. Another example. The CSP property right index was determined based on the weighted average of the property right index of the Kyzylkum and Baiken-U shareholders, but the decision was that KAP owns 50% of EAL.

Yashin: By the way, the Guarantee Agreement has two KAP signatures (Dzhakishev and Tsotsoria) Why?

Фуджи: I don’t know. 

Yashin: Did KAP provide the guarantee on its own? 

Фуджи: Correct.

Фуджи: The Purchase Agreement also contains the buyback option and stipulates that KAP has guaranteed to pay US$540 mln and is obligated to pay it [on behalf of the companies involved in the project].

Фуджи: The conditions of the payment of US$540 mln via a single cash transaction were rather complex considering the market environment at the time and especially considering the cash flow in the companies involved in the project as well as the status of their business [at that time].

We offered to pay the sum piece by piece at each production stage but the suggestion was rejected and KAP insisted on the payment via a single cash transaction. So, we insisted on the condition that [KAP pays US$540 mln] if [the projects] do not go as planned. We have participated in the projects because of this condition.

We also needed KAP to guarantee the payment (since Swinton is a shell-company).

Yashin: In other words, KAP is responsible for the payment. By the way, why 50% in EAL? 

Фуджи: It goes without saying that we did ask KAP to either reduce the sum ($540 mln) or increase our share. After the negotiations, we had learned that 50% of the shares and $540 mln were not negotiable. Instead, we were able to include the condition regarding the buyback and the release from providing the additional funding. So far as we know, the 540 mln include any additional operating expenses.

Yashin: In view of this, 50% of EAL goes to Glendale?  


Yashin: (After a short pause; having asked all the questions he intended to ask). In any event, I knew nothing about this. Incidentally, do the Japanese parties have any intention to demand the buyback? I would appreciate your honest opinion.

Фуджи: The projects are not being implemented according to the plan. The Japanese parties are very concerned about it. However, the projects constitute a national project between Japan and Kazakhstan and we want them to succeed at whatever the cost. We have no intention to use this right at this stage.

Yashin: That’s a relief. We still have the obligations that we must meet. I also need to take a look at the agreements but do you have the first refusal right if the [shares] are sold to Glendale? 

Фуджи: I do not remember the exact wording but such right/limitation does exist. It is stipulated in the agreement (not in the form of the first refusal right but there is a condition regarding the sale of the shares that demands a written agreement from the other party and that the buyer of the shares [complies with the conditions and can] join and adhere to the Shareholders’ Agreement).

Yashin: Incidentally, has the EAL shareholders meeting even been held?

Фуджи: No.

Yashin: May we receive a copy of the registrars of EAL, Swinton and Glendale mentioned in the precondition of the agreements? 

Фуджи: Of course. We will send you the copies independently. 

Yashin: What I said at the meeting on Tuesday regarding the fact that the KAP obligations remain in force stands good. Today’s meeting has helped us to sort through the questions I had. I have got a clear picture of the obligations we have and the Japanese parties’ opinion regarding these projects. I will clarify the matter for Shkolnik based on your present explanations.


You can find all the articles from the series below:


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