KUALA LUMPUR (June 20): Cahya Mata Sarawak Bhd (CMS) has rejected Sarawak utilities firm Syarikat Secso Bhd's claim that the agreement for the supply of electricity to the group's phosphate production plant is deemed terminated.

"The arbitration proceedings surrounding the power purchase agreement (PPA) have commenced, and we firmly believe that the PPA is intact and in force and not terminated as alleged by Sesco," CMS said in a filing on Tuesday (June 20) in response to Bursa Malaysia's query on the matter.

"We will continue to work towards a resolution and ensure the commencement of commercial operations of the project," the group added.

CMS' phosphate production is housed under its subsidiary Cahya Mata Phosphates Industries Sdn Bhd (Phosphates), formerly known as Malaysian Phosphate Additives (Sarawak) Sdn Bhd.

Phosphates and Secso have been involved in a dispute since November last year, in relation to the PPA dated Jan 15, 2019.

Secso had insisted on charging Phosphates a higher-tiered tariff, but CMS is insisting that the PPA only allows the higher tariff upon commercialisation of the phospate plant in Samalaju.

Last week, Phosphates failed to secure a court injunction to stop Sesco from cutting off power supply to the plant.

“The Kuching High Court did not grant an interim injunction after hearing both parties and the earlier ex parte injunction was therefore not extended. Secso is therefore no longer prevented from cutting off electricity supply to the plant.

“However, we have filed appeals on the decision and are taking all necessary legal recourse to ensure the continued operation of the plant,” said CMS in its filing on Tuesday.

On the financial effects of a power shutdown, CMS said:  “The monthly operational expenses for the plant are ongoing. Any potential shutdown would have a financial impact on the operations of the plant and the company.”

CMS said Phosphates’ operation is currently undergoing the final stages of commissioning, which includes testing to comply with the regulations standards and requirements of the local authorities.

“We are working closely with the relevant authorities to obtain the balance of occupation permits required for the plant to be in compliance with local regulations for commercial production. Once these permits are obtained, we will be able to determine the expected date of commencement, which we anticipate will be in the near future,” it added.

Shares of CMS closed unchanged at 98.5 sen, valuing the group at RM1.06 billion.