KUALA LUMPUR (July 3): Kuala Lumpur Kepong Bhd (KL:KLK) said its Indonesian unit is facing an arbitration claim of about RM159 million over the termination of a gas supply agreement.

In a Bursa Malaysia filing on Friday, the plantation group said its wholly owned subsidiary, PT Perindustrian Sawit Synergi (PT PSS), has received notice of the formation of the panel of Indonesia's Badan Arbitrase Nasional Indonesia (Bani) arbitrators.

The arbitral hearing shall commence at Bani with PT Pertagas Niaga (PT GN) on July 10.

PT GN is seeking about US$39 million (RM158.73 million) in compensation under a “take-or-pay” clause, claiming payment for the remaining contract period even if PT PSS did not take the agreed supply. It is also asking the tribunal to confirm that its drawdown of a US$2.78 million bank guarantee from PT PSS was valid.

KLK did not disclose further details of the gas supply agreement, including its tenure. 

In response, KLK said PT PSS will file a counterclaim against PT GN for allegedly breaching the agreement by failing to provide a continuous gas supply to PT PSS.

PT PSS is seeking damages initially quantified at about RM55 million, in addition to a declaration that the drawdown of the bank guarantee was invalid and a refund of the amount drawn.

The group said it believes PT GN's claims lack merit and that PT PSS will vigorously defend its position in the arbitration.

KLK said it has appointed Dentons Hanafiah Ponggawa and Partners in Indonesia to represent its subsidiary in the proceedings.

KLK added that it does not expect the arbitration proceedings to have a material financial or operational impact on the group.

On Friday's market close, KLK’s share price closed up 74 sen or 3.53% to RM21.70, giving the company a market capitalisation of RM24.22 billion.