Govt pumps over RM3b into Felda this year

The ministry says it would inject RM6.23b of financial aid in tranches for the agency to cope with its increasing debt

pic by TMR FILE

THE government has injected more than RM3 billion into the Federal Land Development Agency (Felda) since early this year, to help the agency restructure its finances and pay off settlers’ debt.

The troubled state palm plantation agency has been struggling to make any profit since its listed arm, FGV Holdings Bhd, became one of the world’s largest initial public offering in 2012. Low prices of crude palm oil, financial mismanagement and poor plantation operations are blamed for its misfortune.

The Economic Affairs Ministry, which oversees Felda, said it would inject RM6.23 billion of financial aid in tranches for the agency to cope with its increasing debt. Felda is one of many scandal-plagued agencies in need of a bailout. Others so far included now-defunct state fund 1Malaysia Development Bhd, pilgrim fund Lembaga Tabung Haji and national carrier Malaysia Airlines Bhd.

In a recent parliamentary reply, minister Datuk Seri Mohamed Azmin Ali (picture) said the government has approved RM2.5 billion in the form of government guarantees this year to help Felda restructure its existing debt from financial institutions.

Meanwhile, an additional RM510 million in cash has been channelled into Felda to fund programmes for settlers including RM180 million for a new housing project, RM30 million for a new crop scheme and RM300 million to eliminate debt interest.

Azmin was responding to a question by Datuk Seri Abdul Rahman Mohamad (BN-Lipis) who asked the government to state in detail if its RM6.23 billion allocation to Felda has been accepted in full as stated in the minister’s white paper presentation in April.

The government had earlier approved the multi-billion-ringgit capital injection — to be transferred in stages in a mix of grants, borrowings and government guarantees — to restructure its massive debt and help improve the company’s cash position.

Felda’s total liabilities had risen 12-fold over from RM1.2 billion to RM4.4 billion between 2007 and 2017. Its asset value increased by only 107% over the same period.

Its cash balance, on the other hand, declined from an average of RM2.5 billion from 2007-2011, to about RM35 million as of May 2018.

The white paper, which included a forensic audit account by Ernst & Young, also showed that Felda has impairments worth RM2.2 billion as of Dec 31, 2017, after its investments in eight key assets lost nearly 50% of its original investment value of RM4.4 billion.

One of it included Felda’s controversial stake in loss-making PT Eagle High Plantations Tbk, which was agreed at an inflated price of US$505.4 million (RM2.07 billion) with no “due diligence” carried out on the parties involved prior. It is said that such contentious deals have contributed to Felda’s RM10 billion losses and RM12 billion debt accrued by end-2017.

As part of its turnaround plan, Felda would restructure the principal payment of its debts, and delay the repayment of its RM1.98 billion borrowings in 2019. The remainder of its RM9.3 billion borrowings is scheduled to be repaid from 2020-2028.

The government has also said that Felda’s non-strategic assets would be sold.