Michael Cassidy
Gunns Ltd and the Tasmanian Government both trumpet the economic benefits of an anticipated $6.7 billion boost to the state economy with 1617 new jobs from construction and 292 jobs long term.
However, by counting only benefits and ignoring costs, the economic studies of the proposed pulp mill by Gunns and the Tasmanian Government fail basic due diligence tests. The economic report prepared for Gunns by Allens Consulting Group failed to meet Australian Treasury guidelines for economic appraisal N. Edwards 2006, ‘Too much risk for the reward – an analysis of the pulp mill returns to the people of Tasmania’. In addition, the Tasmanian Treasury Department has not investigated the risks of the mill to the State and the economic viability of the pulp mill has not been tested in public.
The www.tapvision.info Pulp finance article draws together the more significant financial risks arising from Gunns’ proposed pulp mill. As one of the largest proposal of its kind in the southern hemisphere, there are significant risks to the financiers of the project, Gunns Ltd itself, the community, existing businesses and the government, which have not been fully identified and explored. Estimates of the size of the potential economic downside vary from $3 billion to $74 billion.
Risks include:
Risks to Gunns, its financiers and shareholders:
1. Gunns’ lack of experience in building and running a pulp mill
2. High costs relative to international competitors
3. New low cost competitors to supply the global pulp market
4. Highly volatile and down trending international pulp prices
5. Potential negative returns to plantation investors
6. Disruption to wood supplies from climate change, drought and fire
7. Changes to national policy – carbon trading costs
Risks to businesses and community
8. Cost impacts on existing businesses
9. Takeover by trees at the expense of food producers
10. Impacts on tourism operators
11. Lost opportunities for alternative wood-dependent industries
12. Falling housing and property values
13. Additional deaths, accidents and respiratory disease
Risks to taxpayers and government
14. Costs to taxpayers
15. Low to negative returns from public ownership of Tasmanian forests
16. Government subsidies
Got to www.tapvision.info to read the full story.
