THE ongoing arbitration between Cahya Mata Sarawak Bhds unit, Cahya Mata Phosphates Sdn Bhd, and Syarikat SESCO has reached a critical stage, but the appointment of a chairperson by the AIAC is still pending, causing further delays in resolving the dispute.
The conflict arose from a tariff-related disagreement under the power purchase agreement between Cahya Mata Phosphates and SESCO, dating back to January 15, 2019.
After the termination of the initial agreement in 2016, the parties entered into a new agreement governing the sale and purchase of electric power for Cahya Mata Phosphates’ phosphate production facility in Sarawak.
Cahaya Mata Sarawak in a statement said construction of the phosphate complex faced significant delays, mainly during FY2020 and FY2021, due to COVID-19-related restrictions and disruptions.
Stringent border closures impeded the entry of technical specialists into Malaysia, while on-site activities were repeatedly halted due to COVID-19 clusters, it said.
Global logistics backlogs further hindered the procurement of necessary raw materials, significantly impacting the project’s timeline, it added.
Despite efforts to resolve the dispute, it said that SESCO insisted on charging Cahya Mata Phosphates a significantly higher tiered tariff, not aligned with the current conditions.
In response, Cahya Mata Phosphates initiated arbitration proceedings on November 17 2022, and an emergency arbitrator was appointed by AIAC, granting an interim injunction restraining SESCO from terminating the electricity supply until January 31, 2023.
In April 2023, Cahya Mata Phosphates sought another emergency arbitration to prevent SESCO from terminating power to the factory, but the request was denied on May 9, 2023.
Both parties have appointed their respective arbitrators, awaiting the appointment of the third arbitrator by AIAC.
Cahya Mata said it remains steadfast in its claims, affirming the validity of the power purchase agreement and actively pursuing a fair resolution through arbitration.
The group seeks to uphold the original agreement’s integrity and safeguard its operations’ viability.
Cahya Mata emphasised its commitment to addressing these challenges and ensuring the stability and continuity of Cahya Mata Phosphates’ business operations.
It noted that its FY2022 audited financial statements disclosed a contingent liability of RM266,000,000 related to the power purchase agreement.
However, it said that the exact impact remains undetermined until the ongoing legal and arbitration proceedings conclude.
As the arbitration process progresses, Cahya Mata said it remains dedicated to protecting its rights and pursuing a favorable resolution in this complex dispute. – TMR
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