PETALING JAYA: FGV Holdings Bhd has refuted the Federal Land Development Authority’s (Felda) statement that it should receive RM800 million a year from the land lease agreement (LLA) between Felda and FGV.
FGV said the agreement stated that the amount payable to Felda is RM248 million a year plus 15% of the operating profit from LLA land.
“To date, FGV’s responsibility towards Felda (according to 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,“ FGV said in a statement today following news that Felda intends to reclaim some 350,000ha of land that it leased to FGV as a means to shore up its financial position.
It added that Felda has yet to contact FGV to negotiate matters regarding the LLA. Under the terms of agreement, termination of the LLA is allowed. FGV said it will follow the procedures outlined in the LLA if Felda issues a notice on this matter,
“The assets involved in the LLA are estates and do not include FGV’s oil palm mills. If Felda wishes to purchase FGV’s oil palm mills it should be based on ‘willing buyer, willing seller’ and current market value. It also needs the approval of other shareholders through an EGM,“ FGV said.
It further clarified that when the LLA was signed in 2011, the price of crude palm oil (CPO) was at around RM3,000 a tonne and the projected income of Felda (through LLA) used the price of RM2,800 a tonne. CPO pricing plays the most important role in determining the company’s profit or loss. After the initial public offering (IPO) in 2012, the payment to Felda from FGV did not meet Felda’s projections due to the decline in CPO prices.
The yield on FFB was lower than expected as 50% of the trees inherited by FGV in 2012 are considered old trees (more than 21 years). In addition, 15,000ha of land a year was allocated for replanting, contributing to the reduction of FGV’s income.
FGV revealed that replanting expenses for the 15,000ha were in the range of RM300 million a year. In addition to this, the cost of fertilisation and rehabilitation is RM300 million a year.
“FGV chooses to replant and upgrade the estates in order to achieve long-term sustainability. As a result, FGV has been able to reduce the percentage of old trees by about 30%. The LLA land is better and much improved compared to those given to FGV during the IPO.”
On the FGV IPO which is often said to be the cause of Felda’s failure and downfall, FGV responded that 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.”
FGV says the agreement states that the amount payable to Felda is RM248 million a year plus 15% of the operating profit from LLA land. – REUTERSPIX
