KUALA LUMPUR: Tanah Makmur Bhd’s unit Sri Jelutung Palm Oil Mill Sdn Bhd (SJPOM) has inked three separate agreements yesterday to build a biogas plant in Pahang, which will generate electricity to be sold to Tenaga Nasional Bhd (TNB), for an estimated RM11 million.

The three agreements include a shareholders’ agreement, a build, own, operate and transfer (BOOT) agreement, and a land lease agreement, according to Tanah Makmur’s statement yesterday.

Tanah Makmur said the agreements were entered into in relation to the expansion of SJPOM’s palm oil mill processing capacity from 30 tonnes per hour (tph) to 45 tph.

This was after the new regulation imposed by the Malaysian Palm Oil Mill Board, which requires any upgrading of an existing palm oil mill — to obtain a biogas plant — to mitigate its greenhouse gas effects, it said.

Under the shareholders’ agreement with Biopower Climate Care Holding Sdn Bhd (BPCCH) and Metro Havana Sdn Bhd (MH), SJPOM will acquire a 30% stake in MH, a special purpose vehicle to undertake the designing, engineering, financing, construction, commissioning, ownership, operations and maintenance of the biogas plant, while BPCCH will hold the remaining 70%.

BPCCH is a wholly-owned unit of Cenergi SEA, a wholly-owned unit of Khazanah Nasional Bhd that has a track record of operating biogas plants, said Tanah Makmur.

The project’s capital expenditure will be funded through internally-generated funds and external borrowings, while the working capital for the plant will be injected by SJPOM and BPCCH, based on their respective stake, as and when required.

As a start, SJPOM will inject RM663,000 cash (30%) and BPCCH will inject RM1.547 million cash (70%) into MH, said Tanah Makmur in a filing with Bursa Malaysia.

Under the BOOT agreement, MH will process palm oil mill effluent supplied by SJPOM to extract methane gas to generate and sell 1.5mw of electricity to TNB from January 2017.

The plant will be transferred to SJPOM at a minimal consideration 16 years after its commercial operation date.

Lastly, under the land lease agreement, Tanah Makmur shall grant MH a lease over the demised premise, as well as the easement and the exclusive licence to use the lagoon, subject to certain terms and conditions, said Tanah Makmur.

Tanah Makmur shares closed unchanged at RM1.38 yesterday, with a market capitalisation of RM549.46 million.

This article first appeared in digitaledge Daily, on August 7, 2015.