FGV says ready to terminate land lease agreement with Felda

FGV Holdings' logo is pictured at its headquarters in Kuala Lumpur October 9, 2019. — Picture by Choo Choy May
FGV Holdings' logo is pictured at its headquarters in Kuala Lumpur October 9, 2019. — Picture by Choo Choy May

JOHOR BARU, Oct 29 — FGV Holdings Bhd today reiterated that it is has yet to receive a written notice from the Federal Land Development Authority (Felda) regarding the termination of the land lease agreement (LLA), but has prepared its businesses and operations for this eventuality.

In a statement, FGV said once it receives an official notice from Felda as required under the LLA, it will follow the procedures outlined in the LLA to start the process of termination and determining the compensation due to FGV, which will take 18 months to complete.

“As LLA termination had always been a much-talked about scenario, FGV has already prepared its businesses and operations for this eventuality,” the country’s largest crude palm oil producer said.

Yesterday, Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said in a statement that the termination of the LLA and the issuance of a RM9.9 billion worth sukuk by Felda were some of the proposals approved by the Cabinet to ensure FELDA’s recovery. 

FGV said its overall long-term strategy, which is to further grow and strengthen its high value-add business activities focusing on food and branded consumer products, remain intact and may potentially be expedited to provide higher expected returns to shareholders as the result of the LLA termination.

“FGV will at all times safeguard the interests of FGV’s shareholders and we will make the relevant announcements at the appropriate time in the event of material development on this matter,” the company said.

The LLA refers to Felda-owned estates totaling 350,733 hectares that were leased to FGV for 99 years beginning from Nov 1, 2011.

According to FGV, the expected compensation amount due to the company as a result of the LLA termination may range between RM3.5 billion and RM4.3 billion based on internal assessment which will vary depending on FGV’s financial performance for 2020 and 2021 and various other factors.

FGV assured that its plantation supply chain remains intact as the LLA estates only represent 30 per cent of the fresh fruit bunches (FFB) that are processed at the group’s 68 palm oil mills.

“Due to the proximity of the palm oil mill locations to the LLA estates, we do not foresee any changes to the current FFB supply arrangement.

“The rest of FGV’s plantation integrated value chain in the midstream and downstream businesses will remain uninterrupted by the LLA termination exercise,” it added. — Bernama

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