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KUALA LUMPUR (Oct 29): FGV Holdings Bhd said it will begin the process of terminating the land lease agreement (LLA) with the Federal Land Development Authority (Felda) once it receives an official notification from Felda on the matter. , adding that the compensation due to the company could be between RM3.5 billion and RM4.3 billion.
In a statement today, FGV reiterated that it has not yet received a written notification from Felda regarding the termination of the LLA.
“Once FGV receives official notification from Felda as required by the LLA, FGV will follow the procedures outlined in the LLA to initiate the termination process and determine the compensation due to FGV, which will take 18 months to complete,” the company said. .
The LLA refers to farms owned by Felda for a total of 350,733 hectares that were leased to FGV for 99 years as of November 1, 2011.
“The amount of compensation expected due to FGV as a result of the termination of LLA can range from RM3.5 billion to RM4.3 billion based on an internal assessment that will vary based on FGV’s financial performance for 2020 and 2021 and other factors.” said FGV.
Yesterday, the Minister of the Prime Minister’s Department (Economy), Datuk Seri Mustapa Mohamed, said that the cabinet had accepted the recommendation of the ad hoc working group for the termination of the LLA.
Mustapa said that the task force led by Tan Sri Abdul Wahid Omar had identified several major issues that need to be addressed in a timely manner at Felda, including its unsustainable capital structure and its huge debts of RM10.6 billion.
He said the cabinet accepted the task force’s recommendations, which include restructuring Felda’s debts, increasing the basic income from Felda’s plantation lands through the termination of the LLA, and increasing the independence of the settlers, according to the statement.
However, it did not mention the compensation that Felda must pay to FGV, in which it has a 33.66% stake, as a result of the termination.
In its statement today, FGV said that its plantation supply chain remains intact as LLA’s farms only account for 30% of the fresh oil palm fruit bunches (FFB) that are processed in the 68 oil plants of palm of FGV.
“Due to the proximity of the palm oil mill locations to the LLA farms, we do not anticipate any changes to RFF’s current supply arrangement. The remainder of FGV’s integrated value chain of plantations in the midstream and downstream businesses will remain uninterrupted by the completion of LLA, ”said FGV.
“As there has always been a lot of talk about the termination of LLA, FGV has already prepared its businesses and operations for this eventuality,” he added.
As such, FGV said that its overall long-term strategy to continue to grow and strengthen its high-value-added business activities that focus on branded food and consumer products remains intact, and potentially accelerated to deliver higher expected returns to shareholders such as result of termination of LLA. .
“FGV will watch over the interests of FGV shareholders at all times and we will make the relevant announcements in a timely manner in case of material development in this matter,” said the company.
Read also:
PMO: Cabinet agrees to terminate Felda’s land lease with FGV
FGV in transition after termination of the land lease agreement with Felda
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