FT directors quit

They’ve all gone.

All Forestry Tasmania’s independent directors including chairman Bob Annells are heading for the exits.

Tony Ferrall, head of Treasury, is the sole remaining director of the Board which signed off last year’s Annual Report.

Directors come and go but Boards work best if there's some continuity.

The three replacement directors are mainly from forestry academic backgrounds. Which is a little strange given that FT is chronically insolvent. Reconstruction and marketing skills might’ve been handy around the Board table?

Instead Minister Harriss has stacked the Board with forestry academics and is proceeding with his plan to sell immature hardwood plantations to cover operating expenses for the next 2 years so that it can concentrate on unprofitable native forest operations.

It does suggest the impotence of the Board given Mr Ferrall’s role as de facto Voluntary Administrator.

It also suggests the government may have a plan for FT after the hardwood plantation sale? It’s just that they’re not telling us....yet. That plan is less likely to include running FT as a business. Why else would you stack the Board with academics if you were going to restructure FT into a sustainable business as Messrs Harriss and Hodgman once promised?

FT is still to get clear title to all the hardwood plantations trees on its land. This is normally a precondition for any sale. There are 14,000 hectares of Gunns’ MIS plantations on FT’s land still in dispute. Half of Gunns’ MISs were on Gunns’ land and these were all sold to New Forests. PPB Advisory, Gunns’ liquidator is in the process of settling cases where MIS trees are growing on third party land. The liquidator has been agreeing to forgo any claim to trees if landlords surrender any claims to back rents.

However in FT’s case no such settlement has yet been reached.

FT latest Annual Report outlines what looks to be the Liquidator’s claim for MIS trees on FT’s land:

“Separate correspondence has been received from the Gunns liquidator alleging ‘unjust enrichment’ of Forestry Tasmania and that Forestry Tasmania pay $39.950 million to the liquidator for the time, effort and cost expended by Gunns in cultivating the trees planted on land subject to the right. No action has been taken by the liquidator at this stage.”

At a guess the $39.95 million claim is for the 14,000 hectares of MIS trees.... $2,000 per hectare to establish plus almost $1,000 per hectare to maintain. This is what has been spent on the trees to date. Let's offset this against the rent owed, what do you reckon Mr FT ?

The liquidator is well aware of the fact that FT will sell the trees as soon as it can obtain clear title. The liquidator would also be well aware of the fact that the government wants the money from the plantation sale by 30^th June 2017 by which time it hopes to clear a $40 million overdraft expected to accumulate from the preceding 2 years of FT operations.

Minister Harriss has telegraphed what cards he’s holding, so he’s not in much of a bargaining position. 14,000 hectares is a significant part of what FT expects to sell. Total hardwood plantations on FT’s land amount to about 56,000 hectares but about 16,000 hectares is the pruned stuff supposedly needed to supplement the annual 137,000 tonnes of sawlogs required from public forests post 2026/27. That leaves only 40,000 hectares. Without Gunns’ MIS trees it’s only 26,000 hectares, not nearly enough to get FT out of the woods. FT will be lucky to get $1,000 per hectare for any trees it sells, perhaps only $800, less if it has to share some with Gunns’ liquidator which looks increasingly likely.

The odds of FT clearing its debt with the sale of hardwood plantation are lengthening with each passing day.

What then?

Minister Harriss’s myopia in design of his plan for the future has only been exceeded by the incompetence of its implementation.

It wasn’t surprising to see all the independent directors quit.