Curse of Bakun – Impact of power outage

Aluminium smelter Press Metal Bhd is unable to estimate the full impact and consequences of the 27 June power outage in Sarawak but it will be forced to close its smelting plant in Mukah “to facilitate major reconstructions works”.

This is the announcement by Press Metal Bhd to Bursa Malaysia:

PRESS METAL BERHAD (“THE COMPANY”)
– POWER OUTAGE INCIDENT AT ITS SMELTING PLANT IN MUKAH, SARAWAK

The Board of Directors of the Company wishes to inform that its subsidiary, Press Metal Sarawak Sdn Bhd (“PMS”), suffered a sudden shutdown of its primary aluminium production lines at its Mukah smelting plant due to a major power outage that occured at approximately 5.40 p.m. on 27 June 2013 in the State of Sarawak. The power outage lasted for almost six (6) hours, leading to a significant drop in temperature of the production pots. Although power has been restored, PMS was unable to resume metal production as solidification had taken place in the reduction cells of its potline despite its management and staff working tirelessly around the clock to salvage the pots. The incident did not cause any harm to persons or any known uncontrolled emissions.

At the time of this announcement, none of the pots could be salvaged. The Board of Directors are unable to estimate the full impact and consequences of the incident but will be closing the smelting plant to facilitate major reconstructions works. PMS has in place adequate insurance coverage and has initiated engagement with its insurers to ascertain the damage and the cost of the reconstruction works.

The official statement issued by the Sarawak Energy Board on 27 June 2013 pinpoints the cause of the power outage from a sudden drop in the power load originating from the Bakun hydro-electric plant which resulted in a serious frequency drop in the grid which in turn activated an automatic safety tripping mechanism that resulted in the shutdown of all power stations in the grid, otherwise known as the “No Recovery Situation”. The Company had no means of avoiding the occurrence of such an event.

Consequently, PMS has issued a notice to its affected customers that a force majeure event had occured at its Mukah smelting plant thereby impacting the supply of aluminium products to such customers.

Whilst PMS is in the midst of exploring alternative arrangements for its affected customers, the temporary set-back has not affected the operations of the Company’s other subsidiary in Sarawak, Press Metal Bintulu Sdn Bhd, which is nearing the completion of its ramp-up operations at the Samalaju Industrial Park, Bintulu, Sarawak.

Information on PMS

PMS is an 80%-owned subsidiary of the Company, principally engaged in the manufacturing of aluminium products.

Financial Effect

The effect of this unexpected event on the net assets and earnings of the Group for the financial year ending 31 December 2013 will be dependent on the amount of damages and the extent of its recovery.

Directors’ Statement

The Board of Directors of the Company is of the opinion that this incident is not of a material magnitude that will affect the going concern of the Group.

This announcement is dated 1 July 2013.