KUALA LUMPUR (Nov 20): Kelington Group Bhd, whose share price hit a record high of 84.5 sen today, has signed an agreement to purify and liquefy waste gas for Petroliam Nasional Bhd (Petronas).

In a filing with Bursa Malaysia, Kelington said its 94%-owned subsidiary Ace Gases Sdn Bhd has entered into a supply agreement with Petronas for the sale and purchase of carbon dioxide (CO2) waste gas.

Under the scope of the agreement, Kelington said Petronas’ Gas Processing Plant in Kerteh, Terengganu, will supply CO2 waste gas in excess of 50,000 tonnes per year to a new neighbouring gas plant which will be established by Kelington.

Kelington will purify and liquefy the waste gas to produce liquid CO2 to be sold to end users.

The group said the tenure of the agreement is 15 years commencing in year 2019, and the renewal is subject to mutual agreement of the parties upon expiry.

Nonetheless, Kelington said the agreement is on a call-out basis whereby the orders will be issued at the discretion of Petronas based on the schedule of rates set forth in the agreement.

Kelington also said the construction of the new plant would involve an estimated investment cost of RM50 million to RM60 million, which is expected to be funded by a combination of internally-generated funds and borrowings.

In a statement today, Kelington’s chief executive officer Ir Raymond Gan said the investment will cover the construction of a new plant and to purchase related equipment such as storage vessels and liquid tankers for transportation.

Gan also commented that the agreement marks the group’s strategic foray into the supply of industrial gases to become a manufacturer of liquid CO2 in Malaysia.

“The new gas plant will have the capacity to produce 50,000 tonnes per year of liquid CO2 and will potentially generate approximately RM1 billion in revenue over the lifespan of the plant,” he said.

“In addition to supplying domestically in Malaysia, we also aim to export our products to neighbouring countries where the supply of liquid CO2 is inadequate or does not meet the high quality standards required by the F&B industry,” he added.

Moving forward, Gan said Kelington will continue to expand its production manufacturing capacity of other types of gases, in addition to liquid CO2.

“Our decision to expand into the industrial gas business is strategically aimed at providing the group with a long-term recurring revenue stream. It complements our existing project-based business model of providing engineering services which are usually completed within six to 12 months,” he said.

Gan said liquid CO2 is commonly used across a wide variety of industries and in Malaysia, the largest consumers of liquid CO2 is the food and beverage (F&B) industry, used in making carbonated drinks and for refrigeration and freezing of food. It is also used by the fabrication and construction industries.

In the coming years, Gan foresees that demand for liquid CO2 is expected to grow further on the back of rising demand in the F&B industry as well as the upcoming roll-out of large infrastructure and construction projects.

Kelington’s share price went up 2.5 sen or 3.05% to an all-time high of 84.5 sen today, giving it a market capitalisation of RM193.18 million. Year-to-date, the counter has surged more than three times from 28 sen on Dec 29 last year.