State government agency Penang Development Corporation (PDC) made a profit of RM140.6 million after selling its 49 percent shares in Tropical Island Resort Sdn Bhd (TIRSB).

TIRSB is a joint venture between UDA Holdings (51 percent) and Ideal Property (49 percent) to redevelop Pulau Jerejak.

PDC sold its shares for RM156 million to Ideal Property Development Sdn Bhd (Ideal), said its general manager Rosli Jaafar.

"Only when conditions protecting PDC’s interests were fulfilled, the shares sale agreement with Ideal’s subsidiary company, Q Islands Development Sdn Bhd (Q Islands) was signed this year," Rosli said in a statement.

Rosli's statement comes after the Penang government was queried for selling its shares to UDA.

While state BN leader questioned Chief Minister Lim Guan Eng's intention in selling the shares, NGOs Penang Forum raised concerns that redevelopment on the island would destroy its green lungs.

But Lim told BN leaders to check with their "buddies" if they are not happy with project, claiming it was planned by BN.

Rosli said 10 percent deposit of RM15.6 million had been received by PDC, the development arm of the Penang government.

As payment would be made over a period of eight years, PDC shares would only be transferred after full payment is made in 2024, he added.

"TIRSB has been incurring heavy operating losses since it commenced operations of Jerejak Rainforest Resort & Spa (JRRS) in 2004.

"They have now closed its operations since May due to accumulated losses amounting to RM40 million as at end 2015," Rosli said.

According to Rosli, UDA had submitted its development plans for the 80-acre land to the Penang government.

The redevelopment, he said, would comprise 1,200 units of residential development over 80 acres, a marina, four- and five-star hotels, a theme park, an 11.5km round island cycling track and related infrastructure to promote tourism in the state.

"The state government intends to gazette the remaining few hundred acres on the island as forest reserve," Rosli said.

"The state government had approved UDA’s proposals on condition that environmental safeguards are in place and comply with Environment Impact Assessment (EIA) requirements," Rosli added.

"For instance, the bridge linking to Pulau Jerejak will not allow cars and vehicles to cross to Pulau Jerejak," he stressed.

Rosli recalled that in 1997, TIRSB was set up by both the BN federal and state government with a paid-up capital of RM31.5 million.

He said PDC had injected RM15.44 million into TIRSB for a 49 percent share whilst UDA contributed RM16.07 million for a 51 percent share.

Rosli pointed out that the BN state government in 2001 had then approved the award of 80 acres of leasehold land for 60 years (expiring in 2062) in Pulau Jerejak to TIRSB, at a price of RM12.95 million.

In 2001, this price of the 80-acre Pulau Jerejak land of RM12.95 million or RM3.71 per square feet is below the market value of RM47.6 million or RM13.65 per square feet, he added.

"In other words, the BN state government had sold the land to TIRSB at only 27 percent of the market price.

"The land title was transferred to TIRSB by the then BN state government even before the land premium of RM12.95 million had been fully paid," Rosli claimed.

Rosli said PDC even gave out a loan of RM3.4 million to TIRSB on Dec 28, 2007 at an interest rate of 3.5 percent per annum.

The loan principal and interest had increased to RM4.4 million by 2016, he added.

"One of the conditions for accepting UDA’s offer is that the RM4.4 million loan must be settled separately from the sale of the 49 percent shares," Rosli said.

"This was agreed to by UDA and the RM4.4 million loan was fully paid on April this year," he added.

"In other words, PDC will receive a total of RM160.4 million.

"With this equity sale, PDC will recover its cost of investment of RM15.44 million, together with the shareholders’ loan and interest of RM4.4 million which has also been paid by Ideal.

"PDC will make a profit of RM140.6 million. UDA will have 100 percent control of TIRSB upon completion of the novation agreement," Rosli explained.