KUALA LUMPUR (July 15): Petronas Gas Bhd (KL:PETGAS) has entered into a settlement agreement with BASF Petronas Chemicals Sdn Bhd (BPC) under which BPC will pay RM52 million to resolve disputes arising from an electricity supply agreement.

BPC is a joint venture between Germany’s BASF SE and Petronas Chemicals Group Bhd (KL:PCHEM), in which Petroliam Nasional Bhd (Petronas) holds a 64.35% stake. Petronas also owns 51% of Petronas Gas.

In a bourse filing on Tuesday, Petronas Gas said the disputes with BPC stemmed from an electricity supply agreement signed in December 1998 and its supplementary agreements. The disagreements emerged between 2018 and 2019.

However, the details and particulars of the disputes were not disclosed in the filing.

“The agreement provides for a full and final settlement of the disputes between Petronas Gas and BPC, which includes, inter alia, payment of RM52 million by BPC,” said Petronas Gas.

It said the settlement was negotiated on an arm’s length basis and is in the best interest of the company. The transaction is also fair, reasonable, on normal commercial terms, and not detrimental to minority shareholders, the company said.

"The settlement is supported by business opportunities between Petronas Gas and BPC and avoids prolonged dispute resolution processes which may lead to uncertainties in revenue recognition and financial expectations," the company added.

Given Petronas’ interests in both Petronas Gas and Petronas Chemicals, it is deemed interested in the transaction. As such, three Petronas-appointed non-independent non-executive directors on Petronas Gas’ board — Datuk Adif Zulkifli, Abdul Aziz Othman and Lim Li Ping — abstained from deliberating and voting on the matter.

Shares of Petronas Gas closed unchanged at RM17.70 on Tuesday, with a market capitalisation of RM35.02 billion. The stock has fallen by 1.34% so far this year.