KUALA LUMPUR (July 15): Elridge Energy Holdings Bhd (KL:EEHB), which manufactures biomass fuel products, said on Monday it has signed an underwriting agreement with KAF Investment Bank for its initial public offering (IPO) on the ACE Market of Bursa Malaysia.

The company is aiming for a listing in August this year, Elridge said in a statement. Under the underwriting agreement, KAF will underwrite a total of 100 million new shares allocated to the public and eligible persons.

“We have obtained the necessary approvals and are pleased with the progress being made in relation to the listing exercise,” Oliver Yeo, executive director and chief executive officer of Elridge said.

The proposed IPO involves a public issue of 350 million new shares and an offer for sale of 350 million existing shares, according to a draft prospectus filed with Bursa Malaysia. All in all, the listing offers investors up to a 35% stake in the company at a price to be determined later.

The public issue would comprise 80 million shares for the public, 20 million shares for eligible persons, and 250 million shares through private placement to select investors.

Proceeds from the IPO will be used to expand its production capacity in order to cater for orders from other new and existing customers, Elridge said in the draft prospectus.

The company currently operates out of a Port Klang factory, which has a capacity of 720,000 tonnes per year, but has hit a utilisation rate of nearly 74% by end-2023, it noted.

The company plans to acquire a yet-to-be-identified land in Kuantan, Pahang to build a 105,000 sq ft factory that will raise production capacity by 240,000 tonnes. The company has also earmarked proceeds from the IPO to buy equipment for its new factories in Kuantan as well as in Johor and Sabah.

The rest of the proceeds from the IPO will be used as working capital and to defray listing expenses.

Elridge, partly backed by listed electrical distribution equipment firm Mikro MSC Bhd (KL:MIKROMB), mainly manufactures and trades biomass fuel products, particularly palm kernel shell and wood pellets, used to generate heat or electricity.

Biomass products are typically a by-product or waste from renewable sources such as plants or organic waste.

The growing demand, both locally and internationally, for “high quality and certified biomass fuel products as a result of the trend towards sustainable energy generation, as well as the urgent need for countries to address climate change, would augur well” for Elridge, Yeo said.

“This positive market outlook underscores the potential for biomass fuel products to contribute substantially to energy needs and environmental goals,” he said. “Coupled with the current robust performance of the local indices, the timing is just right.”

KAF Investment Bank is the principal adviser, sponsor, underwriter and placement agent for the IPO.