KUALA LUMPUR – The Federal Land Development Authority (Felda) recorded a net loss of RM1.005 billion in the financial year ended December 31, 2022, an increase of 45.77% from the RM545 million loss in 2021.
According to the 2022 Auditor-General’s Report, Felda’s cash and cash equivalent positions by the end of 2022 amounted to RM808 million.
The report also said that Felda has substantial commitments of RM1.561 billion, including RM0.753 billion in replanting liabilities and RM0.808 billion in unspent federal government grants.
Owing to the existing cash balance and cash equivalents, Felda is unable to fulfil its commitments amounting to RM0.753 billion, it revealed.
“The audit team’s findings indicate uncertainty regarding Felda and the group’s ability to sustain operations based on the going concern principle, given the mismatch between loan repayment commitments and cash flow.
“Felda depends on funding from the government and financial institutions to cover both operating costs and liabilities.
“As of December 31, 2022, Felda’s outstanding loans from external institutions amounted to RM8.659 billion (compared to RM8.809 billion in 2021). These loans were obtained for the restructuring of Felda’s debt from 2018 to 2022.
“At the group level, the aggregate loans from external institutions (including the federal government and financial institutions) stood at RM15.117 billion as of December 31, 2022, compared to RM15.903 billion in 2021,” it added.
The report said that Felda has remaining government grants as of December 31, 2022, amounting to RM0.808 billion. In 2022, Felda received grants totaling RM0.214 billion.
“The total government grants decreased by RM0.128 billion (37.4%), primarily due to the reduction in allocations received from the Finance Ministry for that year. This reduction in grants poses a challenge to Felda’s operational continuity, as the organisation heavily relies on financial assistance from the federal government.
“Felda’s loans obtained from financial institutions amount to RM7.973 billion, with an additional RM0.686 billion from the federal government. The significant loan amounts from both financial institutions and the government indicate a substantial commitment by Felda to repay the financing received until maturity,” it explained.
The Auditor-General’s Report also highlighted loans at group level encompassing the Tawarruq Financing Facility agreement signed in 2016 by Felda’s subsidiary company, FIC Properties (FICP), with Govco Holdings Bhd (GovCo). GovCo is a company under the Ministry of Finance (Incorporated), and the agreement’s value stands at RM2.500 billion.
The loan is intended to fund the acquisition of a 37% equity stake in PT Eagle High Plantations Tbk, a company incorporated in Indonesia.
The total principal issued by FICP amounted to RM2.250 billion.
“However, FICP failed to repay the loan, causing Felda to enter into a new agreement with GovCo in 2017, where Felda acted as a corporate guarantor for the Tawarruq Financing Facility. The Felda Group is obligated to repay GovCo, amounting to RM0.200 billion on April 11, 2023 and RM2.878 billion on April 11, 2024.
“The scheduled repayment on April 11, 2024, surpasses the balance of funds in the possession and bank accounts of the Felda Group as of December 31, 2022. Felda has to repay the Tawarruq Financing Facility after GovCo approved a repayment structuring plan dated December 19, 2023, amounting to RM50 million per year for the first five years, starting in 2024.
“The remaining repayment, totaling RM2.595 billion, must be made according to the schedule within 15 years, starting in 2029. Failure to meet the initial payment in 2024 will result in the cancellation and termination of the approved facility restructuring plan. A 50% reduction in the profit from the Tawarruq Financing Facility, amounting to RM0.233 billion, is also contingent on Felda’s compliance with the repayment schedule,” the report said.
Therefore, in order to improve the cash and cash equivalents of Felda and the Group, the audit recommends the following: determine a clear direction so that Felda can continue to operate with strong financial performance without high dependence on the financial aid and support of the federal government.
It also recommends that Felda increase monitoring of operations and the financial performance of subsidiary companies to ensure that the sustainability of the company can be maintained and continue to be viable without dependence on the parent agency in order to be able to give good returns to Felda. – March 6, 2024