1. Introduction

The Board of Directors of Kelington wishes to announce that its 97.2% owned subsidiary, Ace Gases Sdn Bhd (“AGSB”) will be constructing a new Carbon Dioxide Recovery Plant (“the LCO2 Plant”) at PT 21896, Kawasan Perindustrian Lot P, Mukim Kerteh, Daerah Kemaman, Terengganu , at an estimated cost of RM29 million.

2. Background

Pursuant to the supply agreement dated 17 November 2017 entered into between AGSB and Petroliam Nasional Bhd (“Petronas”), AGSB would purchase in excess of 50,000 tonnes of carbon dioxide waste gas per year from Petronas’ gas processing plant in Kerteh, Terengganu. The carbon dioxide waste gas would be recovered and purified to pure liquid carbon dioxide for selling to end users.

In year 2018, the Company had raised an additional RM17.8 million share capital by way of private placement mainly for the purpose of part finance the acquiring of carbon dioxide recovery and purification plant and acquisition of assets for the operations of the industrial gas business division.

3. Information of AGSB

AGSB was incorporated in Malaysia on 20 July 2016, principally engaged in the business of construction of gas manufacturing facilities; production, distribution, supply, import and trading of gases. As at the date of announcement, the share capital of AGSB is RM25,500,000.

4. Rationale and Completion Date of Construction of the LCO2 Plant

The new venture into the industrial gases business complements Kelington’s existing project-based business model of providing engineering services and is expected to grow its recurring income.

Barring any unforeseen circumstances, the LCO2 Plant is expected to be commissioned by December 2019.

5. Financial Effect

(a) Share Capital

The construction of the LCO2 Plant is not expected to have any effect on the share capital of the Company and the shareholding of the substantial shareholders of the Company.

(b) Net Assets

The construction of the LCO2 Plant is not expected to have any material effect on the net assets of Kelington for the financial year ending 31 December 2019.

(c) Earnings

The construction of the LCO2 Plant is not expected to have any material effect on earnings of Kelington for the financial year ending 31 December 2019 until the LCO2 Plant is constructed, which is expected to be in December 2019. Thereafter, the depreciation cost of the LCO2 Plant is expected to reduce the earnings of Kelington until capacity utilisation is optimised.

6. Capital Commitment

The estimated capital commitment for the construction of the LCO2 Plant is RM29 million.

7. Source of Funding

The construction of the LCO2 Plant will be partially funded through proceeds from the private placement exercise conducted in year 2018 (which amounted to RM17.8 million) and the balance will be funded through a combination of internally generated funds and external borrowings.

AGSB had on 9 April 2019 accepted the banking facilities amounting to RM25 million (“Facilities”) extended by HSBC Bank Malaysia Berhad (127776-V), subject to the terms and conditions as stated in the letter of offer dated 25 March 2019.

The Facilities are expected to increase the gearing of the Group from 0.14 times to 0.36 times for the financial year ending 31 December 2019.

8. Interests of Directors, Major Shareholders and Persons Connected

None of the Directors and/or major shareholders of Kelington and persons connected to them have any interest, direct or indirect, in the said construction.

9. Directors' Recommendation

The Board is of the opinion that the construction of the LCO2 Plant is in the best interest of the Company.

10. Approval Required

The highest percentage ratio applicable is 11.9% as thus shareholders’ approval is not required.

The construction of the LCO2 Plant is subject to all applicable approvals relating to the setting up a new gas manufacturing facility in Malaysia. 

This announcement is dated 27 June 2019.