Olam unit selling water rights in Australia for $458m

A unit of Olam International is selling 89,085 megalitres (about 89 billion litres) of its permanent water rights in Australia for A$490 million (S$458 million).

The sale to an entity related to the Public Sector Pension Investment Board (PSP Investments) - one of Canada's largest pension investment managers - is expected to be completed later this month.

Agri and food giant Olam is expected to book a one-time pre-tax capital gain of about A$311 million.

Separately, PSP Investments is buying about 12,000ha of almond orchards and related assets in the Australian state of Victoria that were previously leased to Olam Orchards Australia (OOA).

Both the almond orchards and the associated water rights will continue to be operated by OOA, said Olam.

OOA will pay PSP Investments a share of revenue from the almond orchards.

The agreement is for an initial period of 25 years, with options to renew for another 25 years.

Mr Ashok Krishen, Olam's managing director and chief executive of edible nuts, said: "Consistent with our asset-light approach to tree crop production, this arrangement will enable Olam Orchards Australia to focus on operations and continue to deliver best-in-class products and services to customers.

"I am confident that this partnership with PSP Investments will help lead the industry in sustainable farming and agricultural practices, and protect critical natural resources, such as water, in Australia."

Olam is also in discussions to divest or restructure various assets, in line with its strategic plan. Some of these deals may conclude in this financial year, it said.

Olam shares closed unchanged at $1.80 yesterday.

THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on December 04, 2019, with the headline 'Olam unit selling water rights in Australia for $458m'. Print Edition | Subscribe