Wednesday, 26 October 2016

Forestry Tasmania to reveal all?


It wasn’t really surprising to hear Resources Minister Barnett finally admit Forestry Tasmania’s model is broken, the last Tasmanian to do so.

What was a little surprising was that he didn’t bother saying anything, nor did FT’s 2015/16 Annual Report released at the same time on Tuesday 25th October, about the sale of hardwood plantations needed to cover FT’s losses for 2016 and the current year 2017.

Perhaps he will reveal all today?

Perhaps he will tell us about FT’s agreement with Gunns’ Liquidator about the MIS trees growing on 14,000 hectares of FT’s land? The very trees that will bail out FT, either as a result of the proceeds of sale of both land and trees to a third party or alternatively the harvesting  for plantation chips.

The Annual Report showed a large reduction in private plantations growing on FT land and a consequent large increase in FT plantations growing on FT land, so it was logical to assume FT had done a deal with Gunns to take over ownership.

Most of MIS trees growing on Gunns’ land were all sold to New Forests two years ago and are now managed by Forico.

Other MIS trees were growing on land leased from third parties. The biggest lessor was FT. Land owners with smaller areas leased to Gunns have been encouraged to buy the trees growing on their land for $1 rather than attempt to get the Liquidator to pay rental arrears.

But the Liquidator wasn’t going to sell the trees to FT for $1. He believed they were worth much more. Some were ready to be harvested and the remainder could either be harvested or thinned so there was immediate money to be made.

A year ago the Liquidator claimed $40 million from FT for the trees, this amount being the establishment and maintenance costs. There’s probably about 2 million tonnes of trees at this stage which makes the price $20 per tonne. New Forests when they purchased from Gunns probably paid between $5 and $8 per tonne. Incidentally that’s why plantation harvesting is currently profitable. Anything below $20 is profit for New Forests.

FT weren’t going to pay that price even if it were to offset the amount of rental arrears which as at today are probably about $6 million.

We know from court documents lodged by Gunns’ Liquidator that an agreement was reached a month ago with FT and its legal representatives Abetz Curtis.

Perhaps Mr Barnett will tell us today what was agreed.

4 comments:

  1. No doubt John you have read the declaration of bankruptcy by FT!!

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    1. Gordon, I read the Annual report which on page 103 says FT is a going concern on the basis the Treasurer has provided a Letter of Comfort to Tascorp enabling FT to draw down a line of credit as required.

      I've not seen anything else.

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  2. "On the 29th September 2016 the Board of Forestry Tasmania formally advised shareholder Ministers that, despite the efforts to date, the business was not operating profitably and would be unable to do so for the foreseeable future."

    I assume this is some kind of legal ruse to protect the FT Directors.

    http://www.premier.tas.gov.au/releases/ministerial_statement_-_forestry

    Looking forward to your complete analysis of FTs commercial performance.

    Cheers!

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    Replies
    1. I did see that Gordon. I guess I'm splitting hairs a little. You're right it's an admission of unprofitable trading but the Letter of Comfort still helps them avoid insolvent trading.

      Just completed a draft rant about the latest FT. It'll be up soon.

      Regards

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