The staggering State

 

Following the Bartlett tsunami the Premier has managed to point the State in roughly the right direction from a budgetary aspect although she is still being sparing with her analysis of our predicament if the media release (here) which accompanied the release of the State’s Mid Year Financial Report MYFR is any guide.

The Premier is struggling to send a positive message when she reverts to the old line that “the Report showed the Government remained on track to avoid going into net debt”.

Most readers would draw the fairly obvious conclusion that we are net debt free.

But nothing could be further from the truth.

In a week when forest protesters were severely chastised for their lack of truth one may have expected the Premier to choose her words more carefully.

Ta Ann as saviour

Malaysian owned Ta Ann was lured to Tasmania with grants and assistance ostensibly to add more value to native hardwood timber than the woodchipping option.

 

The company now finds itself at the centre of heated public discussion about the possible over cutting of native forests. Environmental groups have take action to disrupt market to bring pressure to bear upon Ta Ann.

 

Your correspondent Wishy asks: “what evidence do the MLC’s or any other Ta Ann supporters have that NGO information campaigns are actually what has impacted Ta Ann’s profitability and led to the shut down of capacity? Has anyone looked at Ta Ann’s financials in this regard? Are they available for scrutiny?”

Last roll of the dice

The capital raising proposal soon to be presented to shareholders represents Plan X for Gunns Limited.

If the previous plans including closures, layoffs, looting IGA funds and asset sales had worked there would have been no need for Plan X.

But they didn’t.

Trouble ahead for Gunns' MIS

What happens to MIS Growers’ plantations once the Responsible Entity supposedly looking after the tree crops runs into financial difficulties? What has felled others may also befall Gunns.

Gunns: A forlorn hope

When CEO Greg L’Estrange took the pruning shears to most of Gunns assets resulting in a $457 million loss before tax for the year ended 30th June 2011, he must have hoped that he’d cleaned the slate and there would be no further bad news.

Alas this is not the case, as trading continues to disappoint and the book values of assets needs even more downward revision.

Forestry Tasmania's future

Will there still be a place in the world for Forestry Tasmania FT as a GBE after reality bites?

FT has struggled with cash flow and profitability and now it’s selling some of its more commercial activities. All the calls for FT to be restructured may be unnecessary. The in-house Voluntary Liquidator Bob Gordon, like his counterpart at Gunns appears to be doing just that, as assets are sold in an attempt to survive.

But is FT better prepared to face the future? Given that we will become more dependent on plantations, has FT’s management deftly and skilfully positioned FT to meet the challenges?

Stealing IGA funds

 

The Right To Information department at Forestry Tasmania is usually busy responding to Kim Booth’s requests for information

But the latest response to Elise Archer, Liberal Member for Denison at http://www.forestrytas.com.au/uploads/File/pdf/rti2011/RTI11-21_elise_archer.pdf is of particular interest.

A briefing note (below) from Bob Gordon dated 29th July 2011 following an FT board meeting two days earlier claimed Gunns financial problems were overwhelming and likely to result in the appointment of a Receiver by the banks being the secured creditors.

 

Talk about the kettle being called black by a particularly sooty pot. FT at this stage had just experienced another year of negative operating cash flows. The only thing stopping it from following Gunns into Receivership was the Letter of Comfort.

Given any payment from GNS was unlikely, it was incumbent on the Government to find some money to help FT survive so they arranged to pinch $11.5 million from IGA funds.

But how do get money into FT from the IGA? Even though Gunns terminated Contracts 917 and 918 in writing on 18th April as further disclosed in the briefing note the only way was to resurrect the residual rights to provide for payment to Gunns, and divert some to FT ostensibly in settlement of receivables due. Without a transfusion FT was virtually out for the count.

What a rort.

It is likely that Gunns did not include amounts allegedly owing to FT as payables in its financials. To do so would have meant the absurdly concocted measure of underlying profit reported to the market was wrong.

Wouldn’t want ASIC knocking on the door again, would we?

 

Just a bit of an addendum to the hurried article.

It is the sequence of events that is most interesting.

When did the question of a value on the residual rights arise?

Gunns threw in the towel on native forests and abandoned contracts 917 and 918, FT then informed the Government that Gunns was insolvent and unlikely to pay the $26 m to FT which in turn would make FT insolvent? So the Government needed to find a solution for its wholly owned subsidiary?

So when did the question of residual rights surface?

After the possibility of Gunns’ insolvency?
It is clear the Government asked the Solicitor-General  (SG) to advise on the matter of residual rights. Not the value but whether it was possible they still existed.

To add a bit of gloss to proceedings the Government employed a Probity Auditor, not to vet whether rights existed or whether they had any value, but simply whether due process was followed. Which simply meant to check whether the final outcome was consistent with all the relevant documents and correspondence. And surprise surprise, it was.
Why was the particular Probity Auditor selected?

Why not our Auditor General?

Well one of Tasmania’s leading ethicists, the leader of the Government in the Leg Co explained in answer to a question recently that “the Auditor-General is authorised to act independently; he has complete discretion in the performance of his functions and is not subject to direction into whether or not a particular audit is conducted or report made”. Furthermore it “could potentially compromise his ability to perform a holistic, external and independent review of the processes relating to the Tasmanian Forests Intergovernmental Agreement in its entirety”. Better not give the job to someone with too much discretion. Much better to get someone else to do the job, like some guy who just happened to be a Government GBE appointee on the Board of MAIB. The Government’s overriding concern for independence caused it to select as Probity Auditor a person who had recently been bestowed a Government favour.

I’m not sure I understand‘independence’ any longer. Like ‘labour values’ it is becoming meaningless.

Then there is the question as to how the value of the rights was determined. We are still in the dark.

The Government unbundled the process.

Get the SG to give an opinion on whether rights exist.

Then get another guy to pass judgment on whether due process was followed.

Get someone else to decide on what the rights are worth.

Keep everyone in the dark, at arm’s length from one another and then hey presto, abracadabra, Gunns gets $23.5 million and FT $11.5 million.