MEDIA STATEMENT
Kuching High Court grants an ex parte injunction in favour of Cahya Mata Phosphates
Kuching (Sarawak), Tuesday, 16 May 2023 - Further to the Media Statement issued by Cahya Mata Sarawak Berhad ("Cahya Mata" or "the Group") on Monday, 15 May 2023, the Group wishes to update the development of the arbitration action between its subsidiary company, Cahya Mata Phosphates Industries Sdn. Bhd. ("Cahya Mata Phosphates") (formerly known as Malaysia Phosphate Additives Sarawak Sdn. Bhd.) and Syarikat SESCO Berhad ("SESCO").
The Kuching High Court has, on Tuesday, 16 May 2023, granted an ex parte injunction to restrain SESCO from proceeding with the aforesaid action till 25 May 2023 which is fixed for inter parte hearing.
To recap, Cahya Mata Phosphates had referred a dispute under the power purchase agreement dated 15 January 2019 ("PPA") to the Asian International Arbitration Centre ("AIAC") under the dispute resolution mechanism of the PPA pertaining to a dispute on tariff type.
Previously, Cahya Mata Phosphates had signed a power purchase agreement dated 3 February 2016 ("First Agreement") with SESCO. This First Agreement was subsequently terminated and the parties mutually agreed to enter into a new PPA governing the sale and purchase of electric power for our phosphate production facility in Sarawak.
Since the signing of the PPA, the construction of the phosphate complex has experienced significant delays particularly during FY2020 and FY2021 due to the COVID-19-related lockdowns and border restrictions. These delays were attributed to various factors which included strict border closures that restricted the entry of workers from China and other nation's technical and commissioning specialists into Malaysia. Additionally, on-site plant pre-commissioning activities had to be suspended multiple times due to the emergence of COVID-19 clusters. Moreover, the sourcing of new raw materials was hindered by global logistics backlogs, particularly in sea freight. The limitations brought by the pandemic greatly impacted the milestone that was set out in the PPA vis-a-vis the project commercialization.
Due to the above factors, the completion and commissioning of Cahya Mata Phosphates' plant experienced delays. Despite attempts to resolve the dispute, SESCO remained adamant in charging Cahya Mata Phosphates a different tiered tariff which is much higher than what is supposed to be under the present condition. SESCO's continued threats to Cahya Mata Phosphates has led the management to initiate the arbitration proceedings on 17 November 2022 and, subsequent to that through an emergency arbitrator, securing an interim injunction restraining SESCO from terminating the electricity supply until 31 January 2023. The arbitration route is in accordance with the dispute resolution requirements under the PPA, and the emergency arbitrator was appointed by AIAC to preserve the existing status of the PPA and prevent unilateral action by a single party.
Pursuant to the recent threats of termination by SESCO, Cahya Mata Phosphates again in April 2023, applied for another emergency arbitration seeking a further restrain from SESCO in terminating the power to the factory. The emergency arbitrator denied the request from Cahya Mata Phosphates to restrain SESCO on 9 May 2023.
As a result of the emergency arbitrator's refusal to grant interim measures, Cahya Mata Phosphates had commenced a legal action in the Kuching High Court on 10 May 2023 to seek an injunction to restrain SESCO from terminating electricity supply to Cahya Mata Phosphates' plant at Samalaju Park, Sarawak.
Despite on-going legal proceedings, SESCO continued to deem the PPA to be terminated with effect on 11.05.2023 claiming allegations of breach by Cahya Mata Phosphates, notwithstanding that the legal proceedings are still live issues which are yet to be determined in arbitration. Cahya Mata Phosphates contends that the PPA is still subsisting between parties, hence the above injunction proceedings in the Kuching High Court to seek an order for preservation of status quo being the performance of the PPA.
It is acknowledged by all parties that the main arbitration remains ongoing, and both SESCO and Cahya Mata Phosphates have both appointed their respective arbitrators, and are currently awaiting the appointment of the third arbitrator by the AIAC.
Meanwhile, Cahya Mata is committed to mitigating any adverse effects and ensuring that the financial stability and continuity of Cahya Mata Phosphates' business operations remains unaffected. We look forward to a swift and fair resolution of the matter. We will continue to provide updates as the situation unfolds.
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