The Federal Land Development Authority (Felda) could be required to pay about RM3.2 billion to RM4.5 billion to compensate Felda Ventures Holdings Bhd (FGV) if the former wants to scrap its 99-year land lease agreement (LLA) with the latter, reported the New Straits Times.
A source with knowledge of the matter revealed that Felda also needs to provide FGV with an 18-month advance notice if it intends to repossess the 300,000ha land currently rented by the latter.
“As a 33.67 percent associate of Felda, FGV will comply if the parent (company) wants to scrap the LLA and take back its oil palm plantations,” said the insider.
According to Felda Chairman Tan Sri Shahrir Abdul Samad, scrapping the LLA remains an option, as well as exiting as a major shareholder in FGV.
Based on talks in the market, Wilmar International Ltd’s Co-founder Martua Sitorus would likely become the new major stockholder given his existing share of three percent in FGV.
Notably, media reports revealed that Felda is looking to take back the land it had rented out to FGV in 2012 so that the property can be used for businesses with greater returns.
At present, FGV is leasing a 300,000ha land from Felda for RM250 million per annum over 20 years. The rental payment also includes a 15 percent share in yearly profits from the rented land.
Upon cancellation of the LLA, FGV’s earnings is expected to decline over the long term due the loss of the plantation land.
“However, FGV will still be able to buy fresh fruit bunches from Felda” as well as other smallholders and third parties. It can also generate revenue from the sale of crude palm oil, noted the source, adding that the company can still survive as it still has 500,000 hectares of plantations.
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Radin Ghazali, Content Writer at PropertyGuru, edited this story. To contact her about this or other stories email radin@propertyguru.com.my
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