Tuesday, 5 April 2011

Flanagan L'Estrange exchange

It was pleasing to see Greg L’Estrange put pen to paper by replying (HERE) to Richard Flanagan (HERE) rather than rely on the bland response of his media department. It does enable a reader to pick up nuances that are otherwise lost.

It was a tad arrogant however to suggest as Greg did that Richard has a simple view of the world. A different view perhaps?

And it was more than a little disingenuous to come to the rescue of the sacred memory of Franklin blockaders by saying “To compare the Tamar Valley to the Franklin insults the passions and convictions of the thousands of people who took to the bulldozers to stop an icon of pristine wilderness from being inundated”.

Do you remember Philip Ruddock wearing an Amnesty International badge when quizzed about incarcerating men women and children. Perhaps next time on TV Greg could wear a Greenpeace or WWF badge, maybe even an old No Dams sticker.

But the piece de resistance came at the very end when Greg concluded his homily by saying—”It is the mark of a civilised society”.

Isn’t it a little premature for Gunns to take the moral high ground by invoking the ideals of a civilised society given its recent actions.

But overall it does highlight the virtual impossibility of reaching any agreement. Greg promotes his unrecognisable transparent emerging modern company, and exhorts all to follow the new cooperative, fully objective and accountable approach.

But there were a few chunks of relevant information missing from his narrative.

We need to get these on the table.

What’s the point of all the current negotiations, anyway, between the selected assortment of insolvent entities, zombies and tree huggers.

Who’s flying the flag for sensible affordable public policy? The ENGOs? Barry Chipman? Gunns? FT? The contractors?

Is the Government in a position to take any agreement to the next stage?


The responsible minister in the area, serial defendant Bryan Green, hasn’t the moral authority to proceed with such a delicate matter.

Who else?

Over the last week, it was scary to watch the Premier struggle to deal with the glaringly obvious breach of ethical standards by the erratic Ms Thorp. Perhaps leader of The Famous Five might be a more suitable job than leader of the State?

The Premier is unlikely to bring any policy competence to the table.

So where does that leave the whole area of forestry policy?

Graham Wells recently opined that zombie firms should be allowed to fail (HERE). Let the market decide.

Let’s see the dead stags like Gunns and FT fall over on the forest floor and see what new growth springs forth. No matter how much Government intervention and handouts have occurred, the industry is an unbelievable handout dependent mess.

MISs didn’t just decline with the GFC. Even outsiders spotted the graffiti on the wall in 2005.

And the decline in native forest woodchipping has been on the cards to all but the Drover’s Dog for at least as long.

MISs and woodchipping contributed 92% of Gunns’ net profits over the past 10 years and now they’ve gone.

But we have the ridiculous spectacle of a new conspiracy of old enemies trying to resuscitate an ailing industry. It’s gone on for so long it’s become an extended wake. Bill Kelty had to be sent to see if the patient was still alive.

It‘s surreal nonsense.

Greg if there’s a chance you can pull off a deal then I think you need to practice what you preach and disclose a little more. Perhaps you can start by rewriting your response to Richard Flanagan.

I’ve drafted a rewrite incorporating the bits of the narrative you forgot, whilst trying to maintain your authentic inimitable style.

Greg responds to Richard

Richard Flanagan ((Holding up Gunns through secret deals, HERE) might be right when he claims, “loathing of Gunns is deep seated”, but that’s not the sole reason why the pulp mill should not go ahead. There are probably many others.

If it were only Richard who didn’t want a pulp mill, his cause might have fallen on deaf ears. But I understand there are thousands with similar views, from all walks of life, tradesmen, retirees, farmers, accountants, part-time arborists, people just wanting to get on with their lives.

So do we.

But we’ve run out of money.

That’s why Bill Kelty is performing his role as moderator in an historical(sic) farcical standoff between Tasmania’s natural (sic) forestry industry and environmentalists. All other interested parties will just have to sit and wait. The pulp mill was coupled more recently to the forest agreement talks because it’s the only way any of us are going to get another handout from Canberra. Can’t we just work together to milk a little more from the Feds. Just make something too big to fail and the Feds will become our permanent lifeline.

What Mr Flanagan wants is for his view of the world to be asserted ahead of the views of others. We agree on one point at least. We too believe in the supremacy of our views. But we are hoping that we will be forgiven for hollowing out and destroying a very large number of jobs and livelihoods that have sustained five generations of Tasmanians if we, by some miracle, manage to organise private foreign capital to take over part of our natural (sic) heritage.

It’s really quite simple.

The genesis for the Forest Agreement talks was the initiative shown by veteran forest campaigner Sean Cadman approaching me to see if some sort of peace might not be found on my taking over the CEO’s role at Gunns. I’m not sure what Sean was on at the time but he extended a helping hand to us when we were almost down and out following the disastrous revelations in the 2010 half yearly report and my predecessor’s brush with regulators following lack of continuous disclosure to the market which even now is unresolved.

Since then, and during the Kelty talks, Gunns has:

• Committed to exit forever from natural (sic) forest logging. Actually we had no choice in this matter as we had to decide which parts of the business needed to close to prevent cash haemorrhaging and consequent insolvency.

• Asked to have enshrined in its environmental permitting (sic) the commitment to have the pulp mill use only 100 per cent, Forest Stewardship Council certified pulp. Again this was an easy decision as our very survival depends on it and besides, we were getting sick of being harassed by a Teutonic forester.

• Shown through an independent study that $10 billion will be injected into the Tasmanian economy, a third of which will be in northern Tasmania alone. While some will circulate in Tasmania, much will be repatriated offshore.

• Committed to setting up a committee of environmentalists, social welfare and industry representatives to monitor the mill’s operation, and extract as much social and economic benefit from the pulp mill possible. We just love committees like this where there are motherhood goals, costs are ignored and remedial implementation measures nonexistent.

Gunns committed to those decisions because it believes this mill is the only way to restructure a collapsing forestry sector caused by our tunnel vision, greed and incompetence The least we can do as a responsible corporate citizen is to try to fix the mess we’ve created by positioning the company as a successful value-adding pulp exporter, and once again contribute to a revitalized Tasmanian economy.

Exports are not needed to generate import replacements. That’s mercantilist based nonsense that I thought had disappeared with the floating of exchange rates. Many of our supporters are stuck in the past so it’s no surprise they have some outdated ideas. The pulp mill is needed to add value.

The key is value adding. But the longer this project is delayed the fewer benefits will accrue to Tasmanians. Initially Gunns was to be a 100% owner when our market cap was $2.5 billion and the mill costs were only $1.3 billion. But now with mill costs of $2.5 billion and a market cap of $500 million every time I mention retaining a 51% interest in the project the boys from Helsinki fall off their chairs in fits of laughter. So it might be only 25% at best. Which means that for every tonne of pulp sold about a quarter will go back overseas to pay interest costs and the JV partners’ returns, a further 20% will be paid to the Canadians and other owners of the plantation land and trees, 20% will be paid to local contractors who will use most of their proceeds to put imported fuel into their imported machinery. So a little might trickle down through into the local economy—enough to sustain a few hamburger joints in George Town at least.

Yes, Gunns needs this mill, but not as much as Tasmania. The State is even more stuffed than Gunns, due once again to our efforts.

It is also what Bill Kelty is gamely trying to achieve in the Forest Agreement talks, at the same time as overcoming thirty years of mutual scorn. Mr Flanagan may well attack from outside, but that’s not a luxury those inside have or want. For Gunns it is a matter of life and death. The State has yet to bother with separate advice so we should have their continued cooperation if not subservience.

The participants are acting in good faith by recognising that their central goals of secure high conservation value forests and jobs and businesses are truly worthy. But it’s a joke really. Gunns is virtually insolvent. Forestry Tasmania would be wound up if it were a private company. Most contractors are zombies, and the ENGOs don’t know the difference between profits and cash flow. And between them they are deciding on a way forward for the forest industry.

The Finns think we’re certifiably crazy and in urgent need of treatment, and are hesitant in their dealings with us.

But far be it for Mr Flanagan to criticize——he has no skin in this game.

Come to think of it, nor do I. I’m on a 12 month contract and I live in Noosa. And unlike my predecessor who wasn’t afraid to put his money where his motor mouth was, I don’t own any Gunns’ shares. Working for Gunns is risky enough.

The Forest Agreement talks are possibly too complex for Mr Flanagan’s simple view of the world. The world should be eternally grateful for persons like me to help explain the complexities of life.

Except maybe Gunns’ financial statements. The forestry sector doesn’t have an eloquent and engaged (or enraged) fiction writer to carry forward their case to a mainland audience. We have to make do with the old warriors, Barry Chipman and Robert Eastment, and as you know they’re about as useful as one hand clapping.

My vision for the Bell Bay pulp mill, though, is as singular as Mr Flanagan’s. I want a pulp mill that assures its host community - on a fully objective and accountable basis but without any penalties for failure to deliver - that it is safe, that it is clean and that it will meet its promise of job opportunities even though it might slowly strangle the host. Accountability should only be on a prospective basis.

There shouldn’t be a need to rake over the past. What’s done is done. Just get over it guys.

I go further and want to operate a pulp mill that doesn’t detract – in reality or perception - from the tourist and agricultural market values of the Tamar Valley. Apart from additional accommodation and meals required by workers, I’ve yet to meet any tourist or agricultural operator in the Tamar Valley who believes this is possible but that won’t stop me from saying what’s on my autocue. That’s what I’m paid for.

Even further, I want Tasmania to show it is bold enough to attract resource investment and harness the economic and social benefits that come with putting all eggs in one basket and promote the environmental integrity of this mill amidst it. We can do this easily if we are prepared to ignore the costs and the possible downsides.

I know Mr Flanagan and the mill opponents think it is not conceivable that a company with Gunns’ history can achieve this. They’re right. They might even think that the Federal and State Governments are not up to keeping us honest. On past performance they’re spot on.

But so what? Indulgent realism can be a luxury at times.

Where does that leave every forest worker who has lost a job or contract because of the downturn in the forest sector, once they’ve vented their understandable anger at us for principally causing their problems? Where does that leave the cooks, the waiters and the B&B operators who know that the time has come for Tasmania to invest in tourist infrastructure if they are to be able to continue to contribute to the Tasmanian economy? The pulp mill will give them the required confidence, believe it or not. Stand by for a rush of cooks and waiters investing in the Tasmanian economy. Where does that leave Tasmania’s disproportionately large ageing population needing home-based support and healthcare services? Again the pulp mill will fix that problem. Don’t ask me how. I’m just repeating what our overpaid independent consultants said.

It’s much simpler than Mr Flanagan asserts. You’ve just gotta believe, that’s all. Like the Hillsongers.

No presentation of support for the pulp mill would be complete without emphasising the development will take place in the Bell Bay industrial area, not 9 kms away at Longreach, amongst an existing woodchip mill, an aluminium smelter, a seafood processing facility, a power plant and the Port of Launceston. This is not the Tarkine Wilderness. This is most certainly not the Franklin Dam.

For opponents to present the pulp mill as “the next Franklin” is a gross overstatement of the meagre environmental values of the Tamar Valley. To compare the Tamar Valley to the Franklin insults the passions and convictions of the thousands of people who took to the bulldozers to stop an icon of pristine wilderness from being inundated, and highlights how pathetic are the concerns of the people of the Tamar Valley when we all know the Franklin was really not much more than a leech ridden ditch.

Superficially, I agree that in an area valued for its attractiveness to tourists, a badly operating pulp mill might pose some real and perception risks. However I believe, on any objective basis, the real risks are not there. Sure Fukushimas happen but now is the time for trust.

So let’s deal with the perception. As I see it what we must do is work co-operatively, collaboratively, which incidentally will be a first for us, to make sure that Tamar Valley’s tourist and clean agriculture values are not compromised. We don’t have a great track record in that regard either; our last pub caught fire and our wine and walnut businesses sold at a 50% loss.

Gunns will hopefully emerge as a modern company. Right now it’s a debt laden cripple with negative operating cash flow and decrepit poorly performing assets largely unwanted by anyone else. If we can sell the plantation land to the Canadians and get rid of some debt and get the banks off our back, and if we can get some money from the Feds, then we might be able to take up a small interest in a mill.

If not I’m out of here by Xmas, back to Noosa. The Bell Bay sawmill can’t afford to pay me $1 million pa. It mightn’t even be operating at that stage. We’ve made a fair few blunders with our softwood processing business. We bought Auspine, then sold 75% of the trees, closed down 2 sawmills causing huge collateral damage to Scottsdale, discovered we didn’t have enough resource, bought a newer mill from FEA’s Receiver with supply contracts in place, organised a sale and leaseback which fell through at the last moment because the financiers had viability concerns, rechecked the available resource and realised that operating the mill at full capacity was going to be impossible because once again we misjudged the available inputs. Whoops. Who says we’re incapable of running a high tech pulp mill, the most modern of its type in the world? Warwick Raverty spreading lies again, I suppose.

We will work with the people of Rowella and George Town to make sure they don’t suffer. The rest of the Tamar Valley will just have to take their chances. We will support open engagement, and make this mill one of the most transparently operated and full-accountable mills in the world. The opportunity for its legitimacy to be scrutinized is on the table awaiting participation. However there will be no opportunity for redress——one out of two isn’t bad is it?

Gunns might have come late and with much reluctance to its newfound (sic) acknowledgement to operate successfully within its social context, but at least it has. I understand that many will for some time to come be looking to see if the leopard’s spots will fade. Fair enough. My greater challenge is not so much to convince the Tasmanian public that Gunns can now be trusted, for that is impossible, but to convince them Tasmania needs one more roll of the discredited top down model of major industrialisation where the burden of another too big to fail operation will inevitably mean the Feds will intervene if trouble occurs. I hope they will because Tasmania sure as hell couldn’t afford to.

The challenge I send out to the likes of Richard Flanagan is: be objective, not emotive and understand that yours is not the only point of view. We have always been objective. We have pursued our goals with complete disregard for others. Isn’t that what being objective means, to pursue one’s goals? The mere fact that we peddle half-truths by omitting costs when talking about benefits is a separate issue entirely.

Reluctantly we acknowledge that all points of view matter, and we have a responsibility to find a way to meet many people’s needs, and by respecting and upholding due process, we will demonstrate the mark of a civilized society.

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