Kelington to invest RM60mil in gas plant

Foray into purification facility likely to yield RM1bil revenue

Engineering services company Kelington Group Bhd plans to invest up to RM60mil to build a carbon dioxide gas purification plant, following a supply agreement which was inked between its subsidiary and Petroliam Nasional Bhd (Petronas).

Its maiden foray into the business of industrial gases is expected to yield nearly RM1bil in revenue over the lifespan of the gas purification plant.

The group expected to finance the development of the gas plant via a combination of internally generated funds and borrowings.

Kelington’s 94%-owned subsidiary, Ace Gases Sdn Bhd, will be purchasing over 50,000 tonnes of carbon dioxide waste gas per year from Petronas’s gas processing plant in Kerteh, Terengganu.

The carbon dioxide waste gas would be purified to produce liquid carbon dioxide to be sold to the end users, said Kelington in a filing with Bursa Malaysia.

The supply agreement between Ace Gases and Petronas will be effective for 15 years, commencing in 2019.

“The purchase of carbon dioxide waste gas will be funded through internally generated funds.

“The supply agreement is not expected to contribute to the earnings and net assets of Kelington Group for the financial years end- ing Dec 31, 2017 and Dec 31, 2018.

However, it is expected to contribute positively to the earnings and net assets per share of Kelington Group for the financial year ending Dec 31, 2019,” stated the engineering services company.

In a separate press release, Kelington chief exective officer Raymond Gan ( pic) said that the new venture marks the group’s objective to have a strong long-term recurring revenue stream.

“This is our first major investment in our new industrial gas business and we will continue to expand our production manufacturing capacity of other types of gases, in addition to liquid carbon dioxide, at a suitable timing in the future.

“The new venture complements our existing project-based business model of providing engineering services which are usually completed within six to 12 months.

“In the coming years, demand for liquid carbon dioxide is expected to grow further on the back of rising demand in the food and beverages industry as well as the upcoming roll-out of large infrastructure and construction projects,” said Gan.