A two-year long arbitration case brought against the publicly listed Phnom Penh SEZ Co. Plc (CSX:PPSP) by energy provider Colben Energy Holdings (PPSEZ) Ltd and Colben System Plc Ltd (“Colben”) ended last month with Colben withdrawing its initial $14.4 claim and the Arbiter in the case ruling that PPSP had no basis for a counterclaim of breach of confidentiality.
According to official documents, Colben will be required to pay approximately $467,000 to reimburse PPSP for costs incurred in defending against the initial claim while PPSP must pay approximately $78,000 to Colben for defending against the PPSP counterclaim.
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PPSP counterclaimed that Colben breached the confidentiality of the arbitration proceedings by releasing very detailed information in both Singapore and Cambodia however this was not upheld by the court.
Both parties will be required to share arbitration costs of around $84,000 with Colben paying 75% and PPSP 25%. Both parties will have 30 days to pay before incurring interest penalties of around 5% per annum.
PPSP entered a joint venture agreement with Colben Energy Holdings (PPSEZ) Ltd in 2008 to build a heavy fuel oil-fired power plant; retaining 23 percent ownership. Colben is a wholly owned subsidiary of Asiatic Group Holdings, a company listed on the Singapore stock exchange.
Colben first brought the arbitration case against PPSP in November 2020 seeking a minimum of $14.4 million in compensation for what it claimed was a breach of their joint venture (JV) agreement as PPSP lobbied the government for lower tariffs for customers within its SEZ.
Revised tariff rates main issue raised
In June, 2020, the Electricity Authority of Cambodia (EAC), after due process (including public and private meetings) revised the tariffs within the SEZ to reflect two prices; one price for services similar to what customers receive outside the zone and, a different, higher price for customers requesting a back-up supply.
Colben claimed this tariff structure was implemented/based on recommendations/lobbying by PPSP while PPSP insisted that the change in tariff followed Kingdom of Cambodia industrial development policy and, was conducted via a fully transparent EAC tariff review process.
Ultimately, Colben withdrew its claim and agreed to reimburse PPSP for all reasonable costs the company incurred in defending itself.
When Cambodia Investment Review contacted, Mr. Hiroshi Uematsu, CEO of PPSP noted that the company felt all along that the arbitration case was baseless which, he feels has been confirmed by the fact that Colben, after over one year of efforts, withdrew the claim even before going to the Arbitration Tribunal.
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In recommending lower tariffs, PPSP has always believed that it was following the Cambodian Industrial Development Policy while acting in the best interest of both tenants within the zone and Colben, its joint venture partner.
Lower tariffs have proven in the past to be welcomed by customers while ultimately resulting in more kwh sales by the power company. Historically, it’s been a win-win, said Mr. Uematsu.
PPSP is currently trading at KHR 2,480 a share down from its IPO price of KHR 2,860 a share in 2016.