Foreign forestry deal promises to support 'billion trees' plan
Thursday, 2 August 2018
A big forest sale to an overseas investment fund was 'likely' to advance the Government's strategy to plant one billion trees over 10 years, according to the Overseas Investment Office.
Australian company New Forests set up the fund, and associate director MaryKate Bullen expected a further multi-million dollar investment wave from another new fund.
New Forests intended to prune more of the trees, 'increasing the likelihood that the wood will be supplied to domestic processors'. About half of New Zealand logs are exported and much of the balance goes to pulp and paper.
'While all our investments are managed by local firms, we work closely to help with operational efficiencies, and forest certification, which reflects our commitment to environmental and social values,' Bullen said.
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The OIO gave the go-ahead to buy a 38 per cent shareholding in Wenita Forest Products, and full ownership of Otago Land Company, which owns 22,000 hectares of forest land managed by Wenita.
The price of the deal was secret, but an indication of its value was recently revealed when New Forests bought 5000ha in Marlborough for $31 million.
New Forests has promised more protection for indigenous vegetation and wetlands, control against animal pests and wilding conifers, plus more public access.
'These routes will be available via Wenita's existing permit system at first but will eventually be accessible to the public without a permit,' the OIO said.
The New Forests ANZFF2 fund now owns forestry land in New Zealand and Australia to a total value of about A$700m (NZ$764m). By size comparison, a rugby field is about 1ha.
New Forests said there were more opportunities in New Zealand as the 600,000ha of smaller estates planted in the 1990s approached maturity. and smallholder owners chose to sell rather than manage the harvest.
'One risk factor is the rising political issue of foreign ownership of land.
'Consent from the New Zealand Overseas Investment Office requires applicants purchasing sensitive land to meet the 'benefits to New Zealand test' while Australia applies a negative test – the investment must not be harmful to the national interest – as opposed to providing additional benefit,' New Forests said.
The New Zealand proportion of the New Forests ANZFF2 fund is held by a locally registered company, and comprises 48,000ha with about half in Otago.
The 2017 accounts (before the latest deal) showed assets of NZ$270m, revenue of $19m and profit before tax of $14.5m, boosted by a revaluation of property of $72m, minus tax of $22m, leaving the final profit of $56m.
The latest New Forests fund called ANZFF3 has purchased 973ha in the lower North Island and Marlborough. It was eyeing up more forests to take its total investment in both countries to about A$873m, Bullen said.
New Forests was attracted by strong housing markets, rising demand for hardwood chips and softwood logs in China, easing Australian and New Zealand currencies, and low shipping rates, he said.
China takes nearly 40 per cent of all forestry exports, overtaking Japan as the main market.
Builders were also using more cross-laminated timber, with two companies in New Zealand specialising in production, and one of them opening a new facility in Australia.
The emergence of e-readers, iPads, and other digital devices had eroded demand for paper printing, but this has been offset by growth in packaging, tissues, fluff pulp, and new biochemical industries turning trees into liquid fuels, wood pellets, resins and plant-based fibres, a company report said.
Australia and New Zealand have the second largest timberland investment market in the world after the US, which is mostly owned by investment funds.
Investors in New Forests funds are mainly other superannuation and pension funds.