KUALA LUMPUR: Cahaya Mata Sarawak Bhd (CMS) said the judgement rendered by the Kuching High Court last week regarding its subsidiary Cahya Mata Phosphates Industries Sdn Bhd (Phosphates) could have an impact on the company's phosphate production.

 CMS was unable to get a court injunction to prevent Syarikat Sesco Bhd (Sesco) from cutting off the energy supply to its phosphate production facility in Samalaju Industrial Park, Sarawak.

 This relates to its on-going arbitration case with Sesco over a power purchase agreement (PPA) the two companies signed in 2019 and which is still in dispute.

Sesco had issued a default notice to Phosphates on May 11, 2023, stating that it would stop supplying energy to its plant and that the PPA with Phosphates was declared terminated.

  According to CMS, if a power outage happens, all plant operations will come to a complete stop. 

  "Since we have not yet begun commercial production, the financial effects on the group will be limited to monthly expenses and operational costs incurred while the plant is not running," said CMS in a bourse filing last week.

 The market capitalisation of CMS stood at RM1.1 billion after its shares ended Friday's trading session four sen, or 3.77 per cent, lower at RM1.02.

 Today's opening price (June 19) for the stock was lower; it was 98 sen at 10 a.m.

According to a statement issued by CMS last month, COVID-19-related restrictions and disruptions caused considerable delays in the phosphate complex's development, mostly in the fiscal years 2020 and 2021.

It said that COVID-19 clusters frequently forced the suspension of on-site activity and that strict border barriers made it difficult for technical personnel to enter Malaysia.

Global logistical backlogs made it even more difficult to obtain the project's essential raw materials, which had a big influence on the project's schedule.

Despite attempts to settle the disagreement, it claimed that Sesco insisted on charging Phosphates a much higher tiered rate that was out of step with the circumstances at the time.

As of December 31, 2022, Sesco reportedly billed CMS RM266 million for a cumulative deficiency in power usage and payment security.

  According to CMS, Phosphates first referred the dispute with Sesco under the PPA dated January 15, 2019, to the Asian International Arbitration Centre in November.

  The Kuching High Court subsequently set June 16 for its determination on the inter partes (between parties) injunction and issued an ad interim injunction, pending its latest decision.

  CMS's top management said in the filing that it would continue to pursue all available legal options to defend its rights, including continuing to assert the group's claims through arbitration processes.

https://www.nst.com.my/business/2023/06/921687/cms-courts-ruling-will-have-implications-its-phosphate-production-sarawak