PETALING JAYA: FGV Holdings Bhd is expected to receive compensation of between RM3.5 billion and RM4.3 billion from the termination of its land lease agreement (LLA) with the Federal Land Development Authority (Felda), it said in a statement today.
“The LLA refers to Felda-owned estates totalling 350,733 hectares that were leased to FGV for 99 years beginning from Nov 1, 2011. The expected compensation amount due to FGV 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 other various factors,” it said.
The group stated that it has yet to receive written notice from Felda regarding the termination, but once it does, it will follow 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.
The Cabinet on Oct 28 agreed to the termination of the LLA, but did not mention the compensation due to FGV.
In the meantime, FGV said the termination of the LLA had always been talked about and, as such, the group had already prepared its businesses and operations for this eventuality.
It pointed out that its plantation supply chains remain intact as the LLA estates represent only 30% of the fresh fruit bunches (FFB) that are processed at FGV’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.”
At the same time, the group’s overall long-term strategy to further grow and strengthen its high value-add business activities focusing on food and branded consumer products remain intact and potentially expedited to provide higher expected returns to shareholders as the result of the LLA termination.