SESCO seeks RM81 million relief against CMSB

KUCHING: Syarikat SESCO Bhd is seeking relief of more than RM81 million against Cahya Mata Sarawak Bhd (CMSB) and over RM30 million against Malaysian Phosphate Additives (Sarawak) Sdn Bhd (MPA) under a notice of arbitration served on the two companies.

According to Cahya Mata, SESCO had, through their advocates, filed a notice of arbitration dated Nov 24, 2023 (Cahya Mata & SESCO arbitration), and also served the said notice on Cahya Mata on the same day.

SESCO had also on Nov 24, 2023 served a similar notice of arbitration on MPA (now known as Cahya Mata Phosphate Industries Sdn Bhd (CMPI)) (MPA & SESCO arbitration).

“In the notices of Cahya Mata & SESCO arbitration as well as MPA & SESCO arbitration, SESCO is seeking relief of RM81,569,600 (or such other sum as the Arbitral Tribunal may determine) against Cahya Mata whereas SESCO is seeking relief of RM30,430,400 (or such other sum as the Arbitral Tribunal may determine) against MPA.

“SESCO has also filed a formal request that Cahya Mata & SESCO arbitration as well as MPA & SESCO arbitration be consolidated which would mean a joint hearing with Arbitration 1135 before the same Arbitral Tribunal which has been constituted in Arbitration 1135,” Cahya Mata said in a filing with Bursa Malaysia.

Cahya Mata and CMPI have been embroiled in a dispute with SESCO related to a power purchase agreement (PPA) dated Jan 15, 2019, since November 2022. The PPA is for the supply of electricity to CMPI’s phosphate plant in Samalaju Industrial Park, Bintulu.

The disagreement began when SESCO billed the Cahya Mata group for cumulative electricity consumption shortfall and payment security shortfall amounting to RM266 million as at end-December 2022, despite Cahya Mata contending that the phosphate plant is not deemed to have commenced commercial operations.

In June this year, Cahya Mata said the plant’s commercial operation had still not commenced but were undergoing the final stages of commissioning.

According to Cahya Mata, the group must either take a minimum electricity supply capacity based on the computation in the PPA upon commencement of the plant’s commercial operations or pay the electricity consumption shortfall. SESCO cut off the electricity supply to the plant on July 10, 2023 after the Court of Appeal did not grant CMPI’s bid for a preservation order to bar SESCO from terminating the power supply to the plant.

Cahya Mata sought the preservation order to maintain status quo, pending appeal against the Kuching High Court’s decision in June 2023 to dismiss its interim injunction application.

CMPI turned to the Kuching High Court for the interim injunction after its attempt to obtain an interim injunction order from the Asian International Arbitration Centre (AIAC) failed as the arbitrator refused to grant the order. Cahya Mata said there is an on-going arbitration between CMPI and SESCO regarding the PPA. “The evidentiary hearing has been fixed on Aug 26 2024 to Aug 30 2024 before the Arbitral Tribunal in AIAC Arbitration.

“In the interim, the Cahya Mata & SESCO arbitration is in relation to the Sponsor Guarantee dated May 3 2019 (sponsor agreement) entered into between Cahya Mata and SESCO wherein Cahya Mata agreed to be a guarantor for 72.83% of CMPI’s obligation under the PPA.

The balance of 27.17% guarantee was via another Sponsor Guarantee dated May 3 2019 entered between MPA and SESCO,” added Cahya Mata. According to Cahya Mata, the commencement of the arbitration by SESCO does not affect or cause any impact on any material business, financial or operational impact on the Cahya Mata group.

“Cahya Mata has appointed several law firms in Malaysia to represent and assist Cahya Mata in the arbitration proceedings. The company will announce any further developments on the matter as and when they arise,” it added in the filing to the local bourse.