Our Business - Anglo Eastern Plantations PLC 11/1/20, 6:48 PM

Our Business History

AEP Pro'le

Anglo-Eastern Plantations Plc was formed and floated on the London Stock Exchange in 1985 to acquire and develop four estates in North , previously owned by several UK based plantation companies.

The largest of these estates was Tasik, whose development, as a 6,000 hectare (ha) oil palm estate, commenced in 1983. The other three smaller estates, totalling 3,700ha comprising rubber and cocoa, had been established in the 1920s. Funds raised from the flotation were used to complete the development of Tasik, where a 45mt/hr palm oil mill was commissioned in 1991, later upgraded to 60mt/hr in 2005.

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PT Tasik in

In 1993 Genton International (see Shareholders) acquired a controlling holding in Anglo- Eastern. Following a one-for-two rights issue in 1995 the company embarked on an expansion programme comprising:

• acquisition of a small (800ha) oil palm estate (Anak Tasik) in North Sumatra in 1995;

• acquisition in 1995 and development of land totalling 17,600ha in the province of Bengkulu in southern Sumatra;

• acquisition in 1995 of an immature oil palm estate in Peninsular Malaysia.

In Bengkulu a 40mt/hr mill was commissioned in 2002 and upgraded to 60mt/hr in 2004. In June 2007, 15,004 ha had been planted.

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Mill in Bengkulu

In March 2004 the company acquired a neglected oil palm estate of 4,300 ha, called Bina Pitri located in the province of , about 180km south of Tasik. Consideration was $10m. Rights to a further 900ha of land were acquired in 2004 and planted in 2005 bringing the planted area of this property to 4,940 ha. The formerly neglected areas have been rehabilitated. A 30mt/hr mill (expandable to 60mt/hr) was completed in April 2007.

In December 2004 a 20mt/hr mill was commissioned on Blankahan estate, one of the three smaller estates originally acquired in 1985; this mill processes crop from those estates, which were substantially converted to oil palm in 1992/3. All remaining cocoa was removed in 2007. A small area of rubber has been retained.

In December 2004 the company acquired the rights over 4,200ha of vacant land, called Labuhan Bilik, about 130km north of Tasik, at a cost of $0.4m, and has added 1,336 ha since then. In June 2007 1,629 ha had been planted and the area was fully planted in year 2009.

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PT HPP in Labuhan Bilik

In June 2007 the company acquired another neglected oil palm estate of 4,470 ha, Cahaya Pelita Andhika, of which about 1,020 ha were planted and mature. The estate is located on the west coast of North Sumatra, about 180km from the nearest existing group estate, Tasik. The planted areas were rehabilitated and the unplanted areas were planted over five years after acquisition. Until a mill is built, crops are processed at Tasik.

In December 2007 the group acquired two blocks of lands rights. The first comprises 26,000 ha in the province of Central Kalimantan and the second consists of 7,000 ha in Bangka Island. In January 2008 a further 15,000 ha was acquired in Bengkulu, near to the group's existing estates. All three areas are scrub and previously logged secondary forest. It is estimated that of the total land area, 20,000 ha is plantable. Planting are done progressively starting in 2009.

In 2008, the group acquired a 95% equity interest in PT Riau Agrindo Agung (RAA), an Indonesian company owning the rights to 15,000 ha of vacant land in Bengkulu, and a 95% equity interest in PT Empat Lawang Agro Perkasa (ELAP) and PT Karya Kencana Sentosa Tiga (KKST); two Indonesian companies which hold the rights to 14,100 ha and 16,000 ha respectively in . The total addition of 45,100 ha brings the group's total landholding to 132,000 ha from 86,900 ha in the previous year. These new properties all have "rights to occupy" (Izin Lokasi) which will be converted to a formal title of rights (Hak Guna Usaha (HGU)). https://www.angloeastern.co.uk/about-us/our-business Page 4 of 11 Our Business - Anglo Eastern Plantations PLC 11/1/20, 6:48 PM

In 2009, we succeeded in getting the crucial land conversion permit from the Indonesian Forestry Department in Central Kalimantan project.

In 2010, we planted 7,580 hectares of oil palm mainly in Kalimantan, boosting our planted area by 16% to 52,000 hectares. In the same year, we acquired PT Kahayan with the initial "Izin Lokasi" area of 17,500 hectares.

PT KAP in Central Kalimantan

The new Sumindo mill (45 MT/hour) was commissioned in May 2010. Construction work to increase Blankahan mill processing capacity from 25 MT/hour to 40 MT/hour was started in December 2010 and completed in 2011 at a cost of $1.5 million.

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In 2011, we planted 4,800 hectares of oil palm mainly in Kalimantan, boosting our planted area by 9% to 57,100 hectares. New plantings remained behind planned schedule due to adverse dry weather conditions in South Sumatra and Central Kalimantan, alongside with certain hold-up in issuing of necessary permits due to the introduced timber cutting licenses ("IPK").

The Group's had invested $4.5million in the biogas and biomass project for one of the mills in North Sumatera of which civil works for the plant commenced in the fourth quarter of 2012 and the whole project was completed in 2014. This project enhances the waste management treatment of the mill and at the same time mitigates emissions of biogas. The successful implementation and running of this project will pave the way for further similar undertakings for the rest of the Group's mills.In 2012, the Group planted 1,900ha of oil palm mainly in Kalimantan, boosting planted area by 3% to 59,000ha. New plantings remained behind schedule due to protracted negotiations over settlement of land compensation with villagers and a delay in the issuance of land release permit (Izin Pelepasan) for two plantations. However, one of these plantations has obtained the necessary permit and clearing of land for planting are carried out progressively.

The First of our Four Biogas Plants (North Sumatra)

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Permits for the construction of palm oil mills in North Sumatera and Central Kalimantan were held up by local authorities in 2012. The earthworks for the Central Kalimantan mill was commenced in fourth quarter of 2012 but was disrupted by heavy rainfall in the second quarter of 2013. The mill construction was finally completed in the second quarter of 2015. It began commercial operation in the third quarter with an initial capacity to process FFB at a rate of 45mt/hr.

In 2015, the Group opened up new land and planted 1,826ha of oil palm mainly in Kalimantan, boosting planted area including Plasma by 3% to 65,100ha (2014: 63,500ha). This excludes the replanting of 1,423ha of oil palm in North Sumatera. Another 166ha of ageing rubber trees were replanted with oil palm.

In 2016, the Group has completed 1,606ha of new planting of oil palm mainly in Kalimantan, boasting planted area including Plasma by 2.4% to 66,670ha in addition to the replanting of 1,516ha of oil palm in North Sumatera.

Besides, two more biogas plants in Bengkulu and Kalimantan are in the final stages of construction and are estimated to cost a total of $6.8 million. Biogas engines have been installed with the ancillary works covering gas piping and electrical works still in progress. The testing and commissioning should be completed soon and the biogas plants are expected to be operational from the second quarter of 2017. The plants when completed are expected to generate a combined 3 Megawatt of electrical power. A surplus of 15.6 million kWh of electricity worth $1.2 million is projected to be generated per year which the Group intends to sell to the state electricity company. The use of clean energy in the mills will further reduce their reliance on fossil fuels and improve the Group's carbon foot print.

Negotiations to sell the surplus power estimated in excess of 5 million kWh per year to the Indonesian National Electricity Company from its new biogas plant in North Sumatera has been approved by the local authority in January 2017 after the completion of a feasibility study and all the required permits.

In 2017, the Group opened up new land and planted 1,808ha of oil palm mainly in Kalimantan, boasting planted area including smallholder cooperative scheme, known as Plasma, by 2.5% to 68,310ha (2016: 66,670ha). This excludes the replanting of 1,694ha of oil palm in North Sumatera. New plantings remain behind schedule due to delays in finalising settlement of land compensation with villagers in South Sumatera, Bangka and Kalimantan. The villagers seek compensation beyond what the Group considered fair and reasonable resulting in protracted negotiations.

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The 2 megawatt biogas plants in Bengkulu are supplying electricity to the State Electricity Company. In the eight months of operation, it generated 4,807MWh of electricity worth $0.3 million. The sale of electricity is, however, frequently interrupted by power blackout in the state electricity supply caused by faulty transmission lines and unstable power voltage. The situation is likely to improve in the second half of 2018 after upgrade and repairs of transmission lines are completed. The third biogas plant in Kalimantan has been completed and is ready for commissioning. The three biogas plants will further reduce the mills’ reliance on fossil fuels and improve the Group’s carbon footprint. With the current shortage of power supply in North Sumatera, the Group is conducting a feasibility study to build its fourth biogas plant in Rantau Prabat which is expected to cost up to $3.8 million. The state electricity company has reacted positively to the proposal to build a biogas plant in North Sumatera.

The Group will start construction of its seventh mill in North Sumatera in 2018. The 60mt/hr mill is expected to cost $19 million and will be substantially funded by internal cash flows. Costs of civil and structural works including earthworks would be higher as the mill is built on shallow peat soil. The site needs to be compacted with mineral soil and 38 meters long concrete piles to support the construction of the mill and storage facilities. The Group has over the past three years explored various sites outside the plantation and along the Barumun river for the construction of a mill, however, it was not able to obtain the necessary permit which allows conversion of agricultural into industrial land.

In 2018, the Group opened up new land and planted 1,563ha of oil palm mainly in Kalimantan, boosting planted area including the smallholder cooperative scheme, known as Plasma, by 2% to 69,793ha (2017: 68,310ha). This excludes the replanting of 470ha of oil palm in North Sumatera. The Group faced difficulties in concluding fair prices with some villagers over land compensation. In some instances, villagers held onto their land and refused to sell especially in South Sumatera and Bangka.

With the current shortage of power supply in North Sumatera, the Group had begun construction of its fourth biogas plant in Rantau Prapat which is expected to cost up to $3.8 million. The earthworks were delayed by poor soil structure at the biogas lagoon which resulted in erosion and sliding of the embankment. Further soil tests were conducted by geotechnical experts to find the appropriate solution.

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The Group has started construction of its seventh mill in North Sumatera in 2018. The 60mt/hr mill is expected to cost $19 million and will be substantially funded by internal cash flows. Costs of civil and structural works including earthworks would be higher as the mill is built on shallow peat soil. The level of the site needs to be raised higher by filling and compacting with imported mineral soil. The civil works will require 38 metre long concrete piles to support the buildings and storage facilities. The Group has over the past three years explored various sites outside the plantation and along the Barumun river for the construction of a mill, however, it was not able to obtain the necessary permit which allows conversion of agricultural into industrial land.

Our buyers in Kalimantan rely on barges and tankers to move the CPO purchased. The unavailability of barge or difficult road conditions in remote location often delay the collection of CPO from the mill. In order to ensure that there is no disruption to the mill operation, the Group decided to build an additional storage tank and expand its storage facility in the mill in Kalimantan from 9,000mt to 13,000mt at a cost of $200,000.

In 2019, the Group opened up new land and planted 1,757ha of oil palm mainly in Kalimantan, boosting planted area including the smallholder cooperative scheme, known as Plasma, by 2% to 71,481ha (2018: 69,792ha). The Group continues to face difficulties in concluding fair prices with some villagers over land compensation. Nevertheless the pace of compensation settlement had picked up in Bangka following positive feedback from the former land owners over the progress of plasma development. In 2020, the Group plans to plant 3,100ha of oil palm which includes replanting of 800ha in Alno and CPA.

The construction of the fourth biogas plant in Rantau Prapat costing $3.8 million was beset by delays following the collapse of the embankment of the anaerobic reactor lagoon on two occasions. The lagoon was finally relocated after a geotechnical study suggested a safer and more economical option. The biogas engine of 1.2MW capacity had since been installed with all buildings, electrical and piping works completed. Testing is expected to commerce early next year. The inspection and certification by local authorities may however take up to six months before the plant can upload the electricity onto the national grid.

The earthworks for the seventh mill in North Sumatera costing $19 million was completed after some setbacks due to inclement weather and numerous soil investigations. Due to the nature of the peat soil, concrete piles of up to 52-metre-long are now required to support and house building, storage tanks and critical machineries. It is currently evaluating the bids for civil and structural works including the design of effluents treatment plant for liquid and solid wastes to fully comply with environmental impact assessment. The project is earmarked for completion by 2021.

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FFB production in KAP in Kalimantan where 4,887ha had so far been planted is projected to reach 33,000mt by next year and 190,000mt by the year 2030 as planting increases and more palms come of age. FFB are now sent to SGM mill which is about 600km away but during wet season, the FFB are instead sold to local millers. This is because transport time more than doubles as lorries are frequently stuck in mud as untarred public roads are easily damaged by incessant rain and floods. The Group is conducting a feasibility study to build a 45mt/hr mill in KAP to support its operation and to reduce the current high logistic cost.

In 2019 the three mills in MPM, Sumindo and SGM completed their expansion of storage facilities for palm kernels by constructing additional bulking silos at a cost of $800,000 to meet storage needs during peak harvest. A new boiler with a steaming capacity of 40 tph was added to the Sumindo mill at a cost of $800,000.

Areas

At 31 December 2019 the company operated a planted area of approximately 71,500ha as follows:

Oil Palm Oil Palm Oil Palm Rubber Total Mature Immature Total Ha Ha Ha Ha Ha

North Sumatera 15,025 3,852 18,877 262 19,139

Bengkulu 16,981 - 16,981 - 16,981

Riau 4,873 - 4,873 - 4,873

Bangka 538 1,149 1,687 - 1,687

South Sumatera 5,343 1,053 6,396 - 6,396

Kalimantan 12,858 2,533 15,391 - 15,391

Plasma Scheme 1,818 1,743 3,561 - 3,561

Total 57,436 10,330 67,766 262 68,028

Malaysia 3,453 - 3,453 - 3,453

Total group planted area 60,889 10,330 71,219 262 71,481

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Crops Production/Sales – 2019

mt

Oil Palm production

Fresh Fruits Bunch – FFB -own estate 1,025,100 production

-bought-in or 907,100 processed for third parties

Saleable CPO 394,700

Saleable palm kernels 93,100

Oil palm sales

CPO 397,300

Palm kernels 92,900

FFB sold outside 62,100

Rubber production 514

For further details:

Historic data – click here Charts – click here (.pdf)

All group mills process significant quantities of crop bought-in from outside growers.

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