by BERNAMA / pic by TMR FILE
FGV Holdings Bhd has clarified the Land Lease Agreement (LLA) between the Federal Land Development Authority (Felda) and FGV which is still under negotiation.
In a filing with Bursa Malaysia today, it said that at present, Felda has yet to contact FGV to negotiate on matters regarding the LLA, and under the terms of agreement, termination of the LLA is allowed.
“Should Felda issue a notice on this matter, FGV will follow the procedures outlined in the LLA.
“The assets involved in the LLA are estates and do not include FGV’s palm oil mills,” it said.
It added that if Felda wishes to purchase FGV’s palm oil mills, it should be based on “willing buyer, willing seller” and the current market value which needs the approval of shareholders through an extraordinary general meeting.
The palm oil player also said that the company would like to offer an explanation with regard to the statement made by Felda which states that before the initial public offering (IPO) in 2012, Felda had a profit of more than RM1 billion and that after the existence of FGV as a public listed company, Felda suffered losses every year and its total debt increased.
“When the LLA was signed in 2011, the price of crude palm oil was at around RM3,000/tonne and the projected income of Felda (through the LLA) used the price of RM2,800/tonne.
“CPO pricing plays the most important role in determining the company’s profit or loss. After the IPO in 2012, the payment to Felda from FGV did not meet Felda’s projections due to the decline in CPO price,” it said.
It added that replanting expenses for the 15,000 hectares were in the range of RM300 million per annum and in addition to this, the cost of fertilisation and rehabilitation is RM300 million per annum.
“The FGV IPO is often said to be the cause of Felda’s failure and downfall. The real issue is the use of revenue from the IPO, and not the IPO itself. Felda has earned RM5.7 billion from this IPO while FGV has earned RM4.5 billion.
“FGV cannot comment on how Felda use the proceeds from the IPO. Unfortunately for FGV, part of the proceeds was not well invested. Up until end-2018, FGV has made substantial impairments amounting to RM780 million for those new investments,” it said.
To date, FGV’s responsibility towards Felda (according to the LLA) amounting to RM248 million a year has been fully met. FGV has paid more than RM2.5 billion to Felda from 2012 to 2019.
Previously, it was reported that Felda intends to reclaim some 350,000 hectares it has leased to FGV as a means to shore up its financial position.
Chairman Datuk Seri Idris Jusoh said the matter has already been agreed upon by its board of directors and the company is currently awaiting the government’s directive before negotiations can begin with FGV.