Bumitama Agri to be compensated about 400b rupiah for plantation land

BUMITAMA Agri could potentially be compensated 400 billion rupiah (S$42.37 million) for 4,810 hectares of plantation land assets in Indonesia, to net a gain of 21 billion rupiah.

Back in 2012, the company was told that this land, belonging to its subsidiary PT Hatiprima Agro (HPA), had had its location permit revoked because the area had been redesignated as non-forestry area by the Indonesian Ministry of Forestry in 2011.

After a series of appeals and judgments, the High Court in 2013 ruled in favour of HPA regarding the land. One of the remedial options open to HPA was to seek to restore its investments by negotiating with the new owner.

Bumitama took the view that this would be the most efficient option, and launched negotiations leading to Friday's agreement with the new owner of the land, PT Langgeng Makmur Sejahtera (LMS).

Under the agreement, HPA will transfer the assets to LMS for a compensation payment. The exact terms of payment will be negotiated further, as the valuation of the assets is currently being conducted by an independent appraiser.

But the company estimates that the compensation sum will be about 400 billion rupiah, which would represent a gain of 21 billion rupiah over the land's book value of 379 billion rupiah.

Based on this amount, the transfer of assets would have no material impact on the net tangible assets and earnings per share of the company for the financial year ended Dec 31, 2014, Bumitama said.