KUCHING: KKB Engineering Bhd will embark on a production capacity expansion of its steel pipe manufacturing in anticipation of increasing demand for its products under the billion-ringgit Sarawak State Water Grid programme.
The company plans to invest RM5mil on new welding and cutting machines to raise the production capacity to 25,000 tonnes per annum from 18,000 tonnes per annum to strengthen its position to bid for more water-related projects.
KKB group executive director Kho Pok Tong said the capacity expansion project is expected to be implemented in two phases over 24 months.
“It will involve the installation and commissioning of the new machines and production of large diameter range of steel pipes with special linings,” he told StarBiz.
The Sarawak government has increased its funding for the water grid programme to RM4bil from an initial RM1.2bil, and Kho expects Phase Two of the programme to be rolled out in 2022.
KKB group has secured eight water related construction projects worth a total RM250mil under the programme and RM190mil worth of contracts for the supply of water pipes to other contractors who have secured contracts.
The RM5mil funding for the steel pipe manufacturing ‘s capacity expansion project will come from the proceeds of a private placement exercise being undertaken by KKB. This is the company’s first equity fund raising since 2001 and the company expects to raise about RM46.1mil by this month.
KKB Engineering - File pic
The approved private placement entails an issuance of up to about RM30.94mil shares or 12% of KKB’s total number of issued shares.
From the proceeds, the company plans to allocate another RM5mil for the upgrading of its Bako fabrication facility in line with the business expansion of its 60.81%-owned oil and gas outfit OceanMight Sdn Bhd. The project will involve upgrading the existing infrastructure, dredging works as well as upgrading of the jetty load-out facility to enhance OceanMight’s operational efficiency of the fabrication operations.
The group has already invested some RM147mil in the Bako facility, which currently has a fabrication capacity of up to 30,000 tonnes per year.
OceanMight is primarily involved in the provision of engineering, procurement, construction, installation and commissioning (EPCIC) services of offshore facilities.
Licensed by Petroliam Nasional Bhd (Petronas) for offshore facilities construction, OceanMight fabricates a wide range of steel products for the oil and gas industry, including substructures, inter-platform bridges, topsides, jackets, process skids and modular compression skids.
Kho said the upgrading of the Bako fabrication facility is to cater for the potential large number of projects to be rolled out by oil majors in view of the current economic recovery and the upward trend of crude oil prices.
Since 2014, OceanMight has been awarded 11 fabrication contracts for offshore structures worth about RM915mil by the oil majors. Eight of the contracts had been completed and delivered to the clients while two of the three on-going contracts are due for completion by next month and the third in first half of 2022.
KKB plans to set aside RM35.89mil from the proceeds to fund the working capital requirements for its manufacturing and engineering segments.
Of the amount, RM10mil will be for the manufacturing segment, particularly for infrastructure and water-related projects while RM25.89mil for the engineering segment, particularly towards its oil and gas related fabrication projects which require heavier upfront investment during the project commencement stage. Kho said OceanMight has been actively bidding for a large number of contracts locally and is also exploring to tender for offshore structural fabrication projects in the Asean region.
“The group expects its tender books to increase to more than RM1.3bil by 2022, whereby indicatively, approximately RM800mil is related to the oil and gas fabrication contracts and RM500mil related to water related infrastructure projects.”
The group has a current outstanding order book of about RM590mil, which all are scheduled to be progressively completed until early 2023.