This article first appeared in The Edge Financial Daily, on July 5, 2016.

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) is in dispute with the Energy Commission (EC) and energy, green technology and water minister (KeTTHA) over the power purchase agreement (PPA) which the utility group was supposed to sign with YTL Power International Bhd.

TNB announced yesterday that it had applied for leave to commence judicial review proceedings against the EC and KeTTHA at the high court.

In the announcement to Bursa Malaysia, the utility group revealed that the application is in relation to a direction dated April 7 issued by EC to TNB. The direction, according to the announcement, compels TNB, among others, to remove the incorporation of conditions precedent required by the utility group in the proposed new power purchase agreement.

TNB seeks orders of certiorari to quash the direction and the minister’s direction. The EC’s directive came one week after the minister issued a directive to the EC on April 1.

The PPA is for TNB to buy electricity generated by YTL Power Generation’s, a wholly-owned unit of YTL Power International Bhd, an 800mw power plant in Paka.

TNB did not specify the conditions that both EC and KeTTA have directed the group to remove from its negotiation with YTL Power Generation.

TNB also seeks declarations that the direction and the minister’s direction are ultra vires the Act read with Energy Commission Act 2001, and that consequent to the grant of leave, that the direction be stayed pending the hearing and determination of the judicial review proceedings on its merits.

“TNB will make further announcements accordingly as and when there is any material development to the judicial review proceedings,” it said.

To recap, YTL Power was awarded an extension for two years plus 10 months for the 800mw power plant in Paka in October last year following an open tender process.

However, the PPA has yet to be signed eights months after the extension was granted. There was a land dispute between TNB and YTL Power. The land for the Paka plant is owned by TNB, but leased to YTL Power under the terms of the original PPA. It has previously been reported that TNB declined to sign the PPA unless YTL Power entered into a new land lease agreement (LLA). YTL Power, however, asserts that the existing LLA only expires at end-2018 and does not require an extension.

If TNB is successful in the court case, YTL Power, which is facing shrinking electricity revenue from Singapore, will be affected adversely as the extension for the Paka plant could have helped to offset some of the earnings shortfalls across the causeway.

In its announcement, TNB opined that the judicial review proceedings would not have a material financial and operational impact on the utility group, aside from legal and management costs.

However, if TNB’s judicial review is unsuccessful and TNB fails to comply with the EC’s directive, it would be an offence under Section 50E of the Electricity Supply Act 1990. On conviction, TNB is liable to a fine of up to RM200,000 or imprisonment of not more than two years or both, notes TNB in the announcement.