PDZ plans Kazakhstan LPG venture

File picture shows a vessel owned by PDZ Holdings. The shipping company plansto set up a LPG production plant in Kazakhstan to diversify its source of income.

PETALING JAYA: Shipping company PDZ Holdings Bhd is proposing to set up a liquified petroleum gas (LPG) production plant in Kazakhstan and launch itself into the cooking gas business in a RM656mil deal.

To pay for the new business venture, the company said it would raise at least RM672mil via the sale of new shares and a rights issue with warrants.

The US$205mil (RM656mil) entry cost was subject to “negotiation and adjustment,’’ PDZ Holdings told Bursa Malaysia yesterday.

It will be payable via the combination of US$125mil (RM400mil) cash and the issuance of redeemable convertible preference shares (RCPS) for the value of US$80mil (RM256mil).

PDZ Holdings entered into a framework agreement yesterday with Ken Makmur Holdings Sdn Bhd for the proposed production of LPG and condensate from natural gas to be supplied by Ken Makmur from the Rakushechnoye oil and gas field in Kazakhstan.

Ken Makmur had on June 3, 2014 signed an agreement with Markmore Energy (Labuan) Ltd to extract 350 tonnes per day of LPG and 100 tonnes of condensate from the 100 million standard cu ft of gas supplied by Markmore.

Markmore, which is 99% own by Tan Sri Halim Saad, is the concession holder of the Rakushechnoye field. Ken Makmur, controlled by Wan Kamaruddin Wan Mohamed Ali and Chan Yok Peng, has a paid up capital of RM2.

Under the deal, PDZ Holdings is authorised to carry out the construction of the LPG plant, to be completed within 36 months after a date to be mutually agreed by PDZ Holdings and Ken Makmur.

According to PDZ Holdings, the proposed LPG production provides the group with an opportunity to diversify and expand its source of income.

“The board believes that the proposed LPG production would contribute positively to its future earnings and improve the financial position of the group.

“The additional revenue from the proposed LPG production is expected to enhance the company’s profitability and returns on shareholders funds,” it said.

However, the group’s operations in the recent years were affected by weak cargo demand and declining freight charges.

“Operating costs remained high as bunker prices continued to firm up. The prospects of the shipping industry remain weak as freight rates are expected to be depressed in the years ahead,” it added.

This is the second attempt by PDZ Holdings to diversify into the oil and gas business after it cancelled its earlier plan to purchase a 20% stake in Efogen Sdn Bhd.

The company had said the proposed acquisition was its first step towards its plan to grow its present core business in the container liner, shipping and shipping management services business into providing offshore supply vessel services to the oil and gas industry.

In an announcement in September, it said it had mutually agreed to terminate the conditional share acquisition agreement with the seller, Johany Jaafar, after the timeline for the agreement was extended for three times.

PDZ Holdings had signed the conditional agreement on May 14 to acquire the 20% stake in the offshore support vessel provider for RM18mil.