TNB ready to take on UBS in court

  • Business
  • Thursday, 16 Jan 2003

Tenaga Nasional Bhd (TNB) said it is prepared to go to court to contest a RM330mil legal suit filed against it by the Union Bank of Switzerland (UBS). 

“The UBS case is ongoing. It is going to be heard in court,” said TNB chairman Datuk Dr Awang Adek Hussin. 

“We are confident that we have a very good case to fight. We think we can win the case,” he told Bernama in an interview. 

The case is expected to be heard in July this year. Dr Awang, however, said that if an out-of-court settlement was reasonable and in TNB’s favour, it (TNB) might want to consider such an option. 

“On the other hand, if we cannot settle we have to go to court,” he said when asked to comment on news reports that the suit, filed by UBS in February last year, may be settled out of court. 

Datuk Dr Awang Adek Hussin.

UBS had filed the suit in the High Court of London following TNB’s termination of two option agreements in September 2001 that were originally signed in conjunction with TNB’s US$500mil 10-year Yankee bond issue in 1997. 

Under those options, UBS had the right to require TNB to issue up to US$500mil 20-year notes. 

Asked about the ongoing discussion on sharing the fuel cost for generating electricity, Dr Awang said TNB hoped it could be completed by the end of the year. 

The discussions, involving TNB, independent power producers (IPPs), Petronas and the Energy, Communications and Multimedia Ministry, had been dragging on for quite some time now and ought to be sealed “as early as possible”, he said. 

Last year the government indicated that IPPs and Petronas should share the rise in fuel costs. At present, any rise in the fuel cost is passed on by the IPPs to TNB. Until a new fuel cost sharing agreement is formalised, TNB will continue to be burdened by higher fuel costs. 

Some 80% of the electricity in Malaysia is generated by gas, the price of which has been rising due to tight supply. For TNB, gas makes up more than 60% of fuel used. 

At present, the price of gas is also subsidised by the government. Dr Awang said the parties involved in the discussions had yet to reach consensus on how to resolve the issue. 

“TNB should not be bearing the extra cost all the time. There ought to be a much more equitable way of sharing the extra cost,” he said. 

Should a new formula be reached, Dr Awang said, it would not affect the existing power purchase agreements (PPAs) as these agreements had already been sealed. 

“Of course, as we enter into new PPAs with new IPPs as and when necessary, we’ll review the (cost sharing) terms,” he added. – Bernama 

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