Sembcorp Industries, on Nov 9, announced that it is undergoing legal proceedings in relation to the divestment of its municipal water assets in December 2018.

On Dec 21, 2018, Sembcorp completed the sale of its wholly-owned subsidiary Sembcorp Utilities (Netherlands) N.V.’s (SUNNV) 100% stake in Sembcorp Utilities South Africa (SUSA), as well as its 100% effective stake in Sembcorp Silulumanzi to South African Water Works.

The total proceeds from the sale at the time were ZAR718 million ($70 million).

The sale required the consent of the Mbombela Local Municipality, South Africa, which had been obtained prior to its completion.

The consent, according to Sembcorp, was challenged in July 2019 in the South African High Court by “a party who had made an unsuccessful bid to become a local Broad Based Black Economic Empowerment (BBBEE) minority shareholder in Sembcorp Silulumanzi”.

Sembcorp says neither itself or its subsidiaries were parties to the proceedings when they were launched.

One of the potential consequences of the proceedings is that the completed sale may be reversed and that the parties of the sale may have to re-apply for the municipal consent, although chances of the outcome are “remote”, says the group.

“To protect its interests, the Group requested and has been granted approval by the South African High Court for SUNNV and SUSA to be joined as parties to the proceedings,” it adds.

The proceedings are still ongoing as at Nov 9.

Shares in Sembcorp closed flat at $1.66 on Nov 6.