KUALA LUMPUR: The Federal Land Development Authority (Felda) expects to compensate FGV Holdings Bhd "substantially" less than the estimated RM3.5 billion-RM4.3 billion following early termination of their Land Lease Agreement (LLA).
Tan Sri Abdul Wahid Omar, chairman of the special task force on Felda, also said the government agency might buy FGV's palm oil mills located on the LLA land.
The nine-member task force, which includes Felda chairman Datuk Seri Idris Jusoh and Telekom Malaysia Bhd chairman Tan Sri Mohd Bakke Salleh, was set up by the government to address Felda's financial problems.
Abdul Wahid said Felda would discuss with FGV before concluding the exact compensation.
"However, the compensation will be substantially less than what was mentioned by FGV. We do not want to get into that discussion (on actual compensation) before engaging with FGV's management," he said at a media briefing here yesterday.
On Wednesday, the Cabinet reportedly had agreed to terminate Felda's LLA with FGV.
Subsequently on Thursday, FGV announced that the compensation due to the company could be between RM3.5 billion and RM4.3 billion. This excluded its palm oil mills on the leased land.
FGV also said it would start the process of terminating the LLA once it had received an official notice from Felda.
Felda leased 351,000 hectares of plantation land to FGV via an LLA for 99 years from 2012 in return for a fixed payment of RM248 million annually and 15 per cent of the operating profit from LLA land.
Abdul Wahid said Felda would issue a termination notice and planned to take over FGV's palm oil mills across the LLA estates.
"It (notice of termination) will be done together with discussion about the takeover of the mills, which are not subjected under the LLA. We will take holistic approach to discuss on the takeover of the mills," he added.
It is not immediately known the number of palm oil mills on the LLA land.
Affin Hwang Capital said FGV now owns 64 mills, besides managing a total of 439,725ha of plantation land (Malaysia: 417,147ha and Indonesia: 22,578ha) and producing about three million tonnes of crude palm oil annually.
To a question on its 33.66 per cent interest in FGV, Abdul Wahid said Felda had no intention to sell the stake.
On the put option to sell back its 37 per cent stake in PT Eagle High Plantations TPK to Rajawali Group, he said Felda would do so when the option can be exercised in May 2022.
Felda had bought the Eagle High stake for US$505 million in 2016 and had filed a notice in April last year to sell back the stake to Rajawali which challenged the exercise.
Meanwhile, Idris said Felda was considering to sell its non-core assets, which are mainly hotels in London, Sarawak and Sabah.
"We have to wait when the time is right for the right valuation," he added.
Citing an example, Idris said Felda had received a £300 million offer for its four-star Grand Plaza Kensington Hotel in the exclusive district of Kensington, London.
He believes Felda would unlock the right valuation of the hotel in two to three years to a minimum £500 million.
"For now, we do not think it is the right time for us to dispose the asset. We do not want to sell just for the sake of selling it," Idris said.
Felda, via Felda Investment Corp Sdn Bhd, had bought the hotel for £60 million in 2014.
The Grand Plaza Hotel has 62 guest rooms and two units of three-bedroom serviced apartments.
Abdul Wahid said Felda's intention to divest its assets, both abroad and local, would ensure a smooth cashflow.
As part of its recovery plan announced by Minister in the Prime Minister's Department in charge of economy Datuk Seri Mustapa Mohamed on Wednesday, Felda would also issue RM9.9 billion sukuk, besides taking back the 351,000 hectares it leased to FGV.
Felda said it would also restructure debts owed to financial institutions, which stood at a whopping RM10.6 billion.
Abdul Wahid said proceeds from the sukuk issuance would be used to repay loans and for working capital, in addition the LLA compensation.
Felda has claimed that its plantation income had depreciated since FGV's listing in 2012.
Felda's net asset value shrank from RM20.2 billion in 2012 to RM7.1 billion as at December 31 last year.
This has caused its debt level (gearing ratio) rising from 0.5 times to 1.5 times.