KUALA LUMPUR: The Federal Land Development Authority’s (Felda) US$505.4 million (RM2.25 billion) acquisition of a 37% stake in PT Eagle High Plantation Tbk will be funded by a loan from the federal government, said the statutory body’s newly appointed chairman Tan Sri Shahrir Abdul Samad yesterday.

However, he told reporters that Felda has not entered into any arrangements for the funding of the acquisition. He also assured that the funding will not originate from within Felda, and will not involve a government guarantee.

In a follow-up explanation, Felda’s deputy director-general Muzzammil Mohd Nor said the federal government will be the party that raises the fund, through a number of channels, which have yet to be finalised, and subsequently will extend a loan to Felda for the acquisition.

“It will not be a government guarantee. The federal government will be our creditor, and they will raise the fund through their own channels,” he said.

Shahrir then stressed that Felda will merely be a “platform” between the federal government and Rajawali Group, who is the major shareholder of Eagle High and seller of the 37% stake.

Asked whether the acquisition had been mandated by the federal government, Shahrir merely said: “Felda is involved in the negotiation.”

Meanwhile, Shahrir also said the acquisition would not affect Felda settlers’ socio-economic welfare.

“Settlers should understand that the acquisition is not going to affect their interests. In fact, we are not allowed to put any charge on their lands. In that sense, whether Felda’s financial position is healthy or not, their interests are already protected, the land is theirs ... they own the fruits in their plantations,” he explained.

“For the investment in Eagle High, I assure you there are safeguards [for Felda’s interest] built into it. For example, and I think reasonably, we should be able to expect dividend payouts within six months after our acquisition,” he added, but declined to reveal other “safeguards” in the deal.

Of late, Felda has come under heavy scrutiny for its plan to acquire a stake in Eagle High at a time when its financial position is weakening.

Felda has endured two consecutive fiscal years of losses since the listing of Felda Global Ventures Holdings Bhd (FGV) in June 2012. Its annual reports up to 2014 revealed that Felda at the group level, incurred a net loss of RM1.04 billion for the financial year ended Dec 31, 2014 (FY14), narrowing by 48% from RM1.99 billion in the immediate preceding year.

These losses have resulted in Felda’s accumulated funds dropping by 16.46% to RM13.47 billion as at FY14, from RM16.12 billion in FY12.

Yesterday, Shahrir said Felda’s financial statements for FY15 have been audited and will likely be presented to Parliament by March this year.

“Felda is not similar to usual corporate [organisations], we have different accounting policies, especially in recognising gains and losses during a particular period,” he said.

“No, it is not normal for a body like Felda to incur losses, but bear in mind that we have not been receiving government grants since 1996, when our financial strength was relatively strong. So now we are reviewing our portfolio, raising a certain amount of funds mandated by our board, to rebalance our financial position,” he added.

Shahrir, who assumed office on Jan 1 this year, said he has not looked at Felda’s FY15 financial statements, hence was unable to shed light on its profitability during that year.

“Felda was formed since 1956, and we have been receiving government grants for 40 years, for socio-economic purposes. Before we can stand on our own feet, can we say that we were suffering 40 years of losses?” he said, but did not provide a timeline as to when Felda would turn around.

Apart from that, during the 90-minute dialogue with the media, Shahrir stressed that he will first put his focus on Felda.

“Felda is the largest shareholder in FGV, but so far we have not heard any complaints from within the board, so let them manage their business, and let me take care of Felda first,” he said.

Asked about the possibility of privatising FGV, Shahrir said it is a matter to be decided by the board of directors.

“If you want to make major investment decisions such as taking FGV private, it is going to cost money. It will require deliberation by the board and I can’t make that decision alone. My next board meeting is on Jan 24, but that is a special board meeting, so I don’t think it will be discussed at that time,” he said.

Talks of the possibility of privatising FGV emerged recently, but the public listed plantation giant clarified on Monday that there has been no discussion on this matter.

FGV’s share price fell three sen or 1.71% to RM1.72 yesterday, valuing it at RM6.28 billion.