EHP stake acquisition a long-term strategic investment for Felda – Razali

Jan 10, 2017
Deputy Minister in the Prime Minister's Department, Razali Ibrahim.
Deputy Minister in the Prime Minister’s Department, Razali Ibrahim.

The acquisition of a 37 per cent stake in Indonesia’s PT Eagle High Plantations Tbk (EHP) is a strategic investment for the Federal Land Development Authority (Felda) for the long term, said Deputy Minister in the Prime Minister’s Department, Razali Ibrahim.

Quashing claims that the deal was too expensive, he said, the purchase of the stake would enable Felda to have access to a plantation land of over 320,000 hectares (ha), or about 4.4 times, the size of Singapore, including over 125,000ha which had been planted with oil palm.

He said within a year of negotiations between the two parties, the original price of US$650 million (US$1 = RM4.47) offered for EHP was reduced by three times, until the sales and purchase agreement was finally signed on Dec 23, 2016 at US$505 million.

“We may not get a joint-venture with that kind of land size in one transaction. The negotiations had led to a significant reduction (in price) and it would be beneficial to our company.

“That’s why, I am not surprised that in an interview, the other party had said that it was very difficult to sign the agreement with us and this showed that we are always thinking of the interests of our company and the settlers,” he said in a media conference here yesterday.

Last December, Felda announced that it, via unit, FIC Properties Sdn Bhd, would buy a key stake in EHP, which is the biggest palm oil company in Indonesia, and had signed a sales and purchase pact with the Rajawali Group.

Razali said the palm oil estate has been re-planted and was not bearing fruit yet.

“This will reduce Felda ‘s operating costs because the company need not cut down old trees and re-plant,” he said.

He gave an assurance the agreement with Rajawali would not affect the interests of the settlers as the funding was obtained in the form of loans from the government and not from existing funds.

Razali said the Indonesian company needed to obtain approval from the Indonesian government, which was conditions precedent before any payment was made.

“This is to assure that our investments will bear fruition when there is approval from the Indonesian government. Felda has not made any payments so far until all conditions are met,” he said.

Razali said Prime Minister Najib Razak was also monitoring the agreement closely and Felda would not make any payments that could jeopardise its position.

He said the Rajawali Group was expected to gain approval from the Indonesian government by end-January. — Bernama