Benalec sells 1,000 acres off Tg Piai

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Bhd has secured a major offtaker for 1,000 acres (400ha) of reclaimable land off Tanjung Piai, at the southern tip of Johor, for an estimated value of RM2.5 billion to RM3 billion.Yesterday, the group announced to Bursa Malaysia that its 70%-owned unit, Spektrum Kukuh Sdn Bhd (SKSB), had entered into a binding term sheet with the State Secretary, Johor and 1MY Strategic Oil Terminal Sdn Bhd “to undertake the reclamation works and sale of approximately 1,000 acres off the coast of Tanjung Piai for the purpose of constructing and operating a crude oil and petroleum storage facility together with a private jetty”.While the announcement didn’t state the value of the transaction, as the sale and purchaseagreement is only expected to be signed later, sources said Benalec was pricing its initial reclaimable tracts off Tanjung Piai at over RM3 million per acre. However, given that 1,000 acres is a huge plot, the pricing could be lower at RM2.5 million to RM3 million per acre. This compared to about RM10 million per acre in the Jurong Industrial Estate, an oil and gas hub built on reclaimed land in Singapore.Benalec’s announcement came about the same time as yesterday’s news that Malaysia and the United Arab Emirates (UAE) had agreed to establish an RM18 billion Aabar-1MDB strategic partnership “to focus on making sustainable investments in important high-impact projects”, and for Abu Dhabi to set up a RM21 billion crude oil and petroleum storage facility off the coast of Tanjung Piai in Johor. While it is not stated in Benalec’s announcement, it is understood that the 1,000 acres will be for the Aabar-1MDB’s initiatives. The 1,000 acres form part of Benalec’s entitlements to reclaim 3,485 acres off the coast of Tanjung Piai and another 1,760 acres along the shoreline of Pengerang,Johor. The group, via its subsidiaries Spektrum Kukuh and Spektrum Budi Sdn Bhd, last September sealed the land concessions with the Johor government, but the Environmental Impact Assessment (EIA) on the entitled area is still ongoing. Benalec had not announced major news on these plots until yesterday.Mak Hoy Ken, an analyst with AmResearch, expects the sale of 1,000 acres to 1MY Strategic Oil Terminal to be a catalyst for the marine engineering group.“This is likely to accelerate [the] EIA process as it involves potential inflow of foreign direct investments  through a strategic land sale. It will also entice more foreign MNCs to invest there,” he said.It is understood that Benalec’s management is looking at commencing reclamation works in the second half of 2013 with earnings to be reflected in its financial year ending June 30, 2014. With a hive of oil and gas projects in southern Johor, Benalec has intended to sell the plots in Tanjung Piai to international tank farm operators, not only for storage of crude oil but also edible oil, whereas Pengerang will be mainly for fabricators. Both Benalec’s entitlement areas — Tanjung Piai and Pengerang — have strategic sea frontage and will be accessible to sea transport. Benalec has been approaching tank farm operators from the Middle East, Europe and China, some of which are already operating in the Jurong Industrial Estate but are looking for more land to expand their capacity. The latest announcement on the sale of 1,000 acres to 1MY Strategic Oil Terminal is a major boost to the group.“Sustainable investment in important high-impact projects is vital to Malaysia’s long-term economic and social growth, while the storage facility in Tanjung Piai, with a capacity to store 60 million barrels of crude oil and petroleum, will spur significant economic activities,” said Prime Minister Datuk Seri Najib Razak, summarising the joint initiative with the UAE that looks set to include Benalec as one of the beneficiaries.This article first appeared in The Edge Financial Daily, on March 13, 2013.