GRP says no longer assured of winning China mixed-development project

SINGAPORE - Under a new agreement with the local government and recent changes to land right policies in China, industrial product supplier GRP Limited no longer has assurance that it will be able to win a mixed-development project in the Chinese city of Tangshan, the company said in a Singapore Exchange filing on Tuesday night (Nov 27).

GRP said that a 165 mu (110,000 square metre) plot of land, which its indirect wholly owned subsidiary Tangshan GRP Trading acquired in March 2016 as part of arrangements to secure the project, is being repossessed by the Kaiping district government in Tangshan. In the agreement between Tangshan GRP and the local government, the repossession value for the land is 63.8 million yuan (S$12.6 million) and will be paid to Tangshan GRP in two instalments by Dec 31, 2020.

The plot will be rezoned for mixed development according to the Tangshan City Land Department's master plan, and subsequently put up for tender as part of the entire 1195.97 mu land plot for the project.

Previously in February 2015, Tangshan GRP had entered into an agreement with the Kaiping government to obtain development rights to undertake the project if it successfully tendered for the land available for development. Tangshan GRP also agreed to advance 85 million yuan to the Kaiping government in exchange for the first right of refusal to participate in the project.

GRP said that because there have been changes in land right policies in China since 2016, there is no longer any guarantee that it will be able to win the bid for the land when it is put up for tender as a whole.

So far, GRP has disbursed 28.7 million of the 85 million yuan advance given in consideration to obtain the first right of refusal, and has commenced negotiation to recover the disbursed amount from the Kaiping government.

The repossession agreement is not expected to have any material impact on the consolidated net tangible assets and earnings per share of the company and group for the financial year ending June 30, 2019.

GRP shares closed at $0.128 on Tuesday, down 0.2 cent.