This article first appeared in The Edge Malaysia Weekly on September 9, 2024 - September 15, 2024

Newly listed biofuel producer Elridge Energy Holdings Bhd (KL:ELRIDGE) last week announced that it had signed a memorandum of understanding (MoU) with PT Orion APAC Indonesia, a biomass fuel trader and one of the former’s key customers.

Under the MoU, Elridge Energy will supply Orion with 150,000 tonnes of palm kernel shells (PKS) every year for three years, starting in April 2025 until March 2028.

A by-product of palm oil production, PKS is the hard covering of the kernel that is left after the oil is pressed from the mesocarp and the kernel nut removed from the palm fruit.

According to Elridge Energy, the contract includes an option for automatic renewal for an additional three years, subject to renegotiated terms and conditions. It added that the contract is expected to contribute positively to its financial performance.

No value was given for the contract or MoU signed.

Although once considered a waste product, PKS have long been used as a fuel source in palm oil mill steam boilers in Malaysia and Indonesia. Their value has risen with power producers in Europe and Asia-Pacific buying more PKS as it is considered a renewable energy source.

As the biggest palm oil producer in the world, Indonesia is a top exporter of PKS, especially to Japan.

As such, Elridge Energy’s announcement is raising eyebrows over why Orion would need to buy PKS from it.

Could it be that the PKS are to be shipped elsewhere on Orion’s behalf? Even then, it is reported that the price of this biomass product from Indonesia is highly competitive compared to that from Malaysia.

Perhaps it is an issue of quality. Are Malaysian PKS better than those from Indonesia?

These are questions that Elridge Energy would do well to address.

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