Southwood: Where was the due diligence?

Forests Minister and Deputy Premier Brian Green, right, with Forestry Tasmania chief Bob Gordon

SOUTHWOOD DEAL: WHERE WAS THE DUE DILIGENCE?
Forestry Tas is Abusing Treasury Letter of Comfort

Tim Morris MP
Greens Treasury Spokesperson
Wednesday, 17 October 2012

The Tasmanian Greens today raised concerns about the Treasury Letter of Comfort granted to Forestry Tasmania, in light of the secretive and irresponsible conduct surrounding the purchase of the Southwood sawmill.

Greens Treasury spokesperson Tim Morris MP said Treasury should have been involved in the due diligence prior to the mill’s purchase from Gunns.

“It is almost unthinkable that Treasury would not have been involved in due diligence considerations around Forestry Tasmania’s purchase of the Southwood mill,” Mr Morris said.

“Given that Forestry Tasmania is operating under a Treasury Letter of Comfort, it’s yet another slap in the face for Tasmanian taxpayers that Treasury has been kept in the dark over this purchase deal until it was too late.”

“This Letter of Comfort is allowing Forestry Tasmania to effectively treat taxpayers’ money as a slush fund to spend whenever and wherever it likes, without ever having to wear the consequences for its poor investment decisions.”

“Bob Gordon himself has now admitted that Forestry Tasmania did not do a good job on due diligence before they loaned $3.3 million to Dell Vista, who defaulted on payments after just a few months.”

Earlier on Tasmanian Times:
• FT’s next takeover target: Gunns’ 18 MIS plantations … You read it here first
• Shock revelation gives chance to retire 40,000 sawlog quota. Booth: Deceit. Giddings: The peace deal

• SENATOR THE HON RICHARD COLBECK

Senator for Tasmania

Shadow Parliamentary Secretary for Fisheries and Forestry
Shadow Parliamentary Secretary for Innovation, Industry and Science

M E D I A R E L E A S E

Wednesday, September 17, 2012

Govt needs to have Tasmanian special timbers on its arts agenda

Senator Richard Colbeck has asked what the Labor Government intends to do about the devastating impacts of proposed forestry changes on stocks of Tasmanian special timbers.

Senator Colbeck asked in estimates if Minister for the Arts and for Regional Australia, Simon Crean, had called for an examination into the impact on the arts and artisans if supplies were cut.

“The Special Timbers Study of 2009 found there were 2000 full time jobs in the Tasmanian special timber sector, with a further 8500 engaging as a hobby or to a limited commercial extent,” Senator Colbeck said.

“That’s more than 10,000 Tasmanians who will be impacted if our concerns about the forestry process come to fruition.

“Beyond the direct impact, there will be flow-on effects through to the tourism industry, and it could wipe out high-value activities, such as Tasmania’s wooden boat building sector.”

The verification process used as the basis for Tasmania’s forestry talks identified 12,500m3 of timber, comprising 10,000m3 of blackwood, and the balance having all other species including Huon Pine, King Billy, Celery-top Pine, Myrtle, Sassafras and Musk.

“Forestry Tasmania’s analysis of the original greens claim under the IGA was that it would deliver 6700m3 of blackwood and 500m3 of non-blackwood species – a reduction of 80%,” Senator Colbeck said.

He said this was a critical issue for those engaged in activities with special timbers.

“The nature of this is that a Huon Pine boat is a Huon Pine boat,” Senator Colbeck said. “There is no alternative. Without the material there is simply no industry.

“We’re well into the end game on this process and the Government should have an understanding of these issues.”

• QUESTIONS OVER SOUTHWOOD MILL QUOTA

Kim Booth MP
Greens Forestry Spokesperson
Wednesday, 17 October 2012

The Tasmanian Greens said questions remained over who currently holds the 40,000 cubic metres quota attached to the Southwood sawmill secretly purchased by Forestry Tasmania using taxpayers’ money.

In State Parliament today, Greens Forestry spokesperson Kim Booth MP asked the Resources Minister Bryan Green to provide clarity over who holds the quota rights, which could be crucial to the successful resolution of signatory negotiations under the Tasmanian Forests Intergovernmental Agreement.

“Forestry Tasmania’s decision to buy Southwood had nothing to do with helping along the IGA, but was in fact just another attempt to further undermine the signatory negotiations,” Mr Booth said.

“They knew that retiring this quota could potentially go a long way to helping signatories reach a binding and lasting agreement to deliver sustainable timber yields to the forest industry, but that’s not what they wanted.”

“This would have been a perfect opportunity to retire the Southwood mill quota, but instead Forestry Tasmania fell over itself to buy a distressed asset and make sure that the wood supply quota was locked into a business as usual deal.”

“Clarifying who still owns the quota, and the terms of its lease arrangements, will inform the public debate as to whether this quota can play an important role in helping the IGA signatories reach an agreement.”

• Kim Booth talks to Louise Saunders, ABC Radio. Transcript by David Obendorf:

Greens criticise FT Southwood deal
Wed 17 Oct 2012, 10:57am by Louise Saunders

http://www.abc.net.au/hobart/programs/hobart_drive/

Greens Forestry spokesman Kim Booth talking to 936 Drive’s Louise Saunders about Forestry Tasmania’s purchase of the Southwood sawmill. Download audio Forestry Tasmania says it’s done nothing wrong in buying the mill.

Transcript:

Louise Saunders: Revelations today that Forestry Tasmania has purchased the Southwood saw mill in the Huon Valley from Gunns; paying $3.3 million dollar to buy the mill. And criticism, this afternoon, from the Greens saying that it’s an opportunity to retire the saw log contracts on that; in progression towards the forests peace deal. With me is the Greens forestry spokesperson, Kim Booth.

Why?… should the mill be actually closed. Looking through what you’ve said, are you suggesting the mill be closed down and put an end to it?

Kim Booth: Well, of course the mill is already closed and has been closed for some period of time because Gunns decided to get out of that business because it was financially unviable.

But more importantly I think we need to shine the spotlight on this rogue agency, Forestry Tasmania, who appears to have deceitfully, ahhm… purchased a saw mill in contradiction, you know, of the general principles of a government not being involved in business and not interfering in the market. And, ahh… no disclosing it. In October last year, I think, Forestry Tasmania themselves were ahh… skiting on their website, Branchline that the mill had actually been purchased by a company – a Victorian company, called Dell Vista. Now we need to know what happened there. How come it has all of a sudden fallen into the hands of Neville Smith. What role has Forestry Tasmania played here? Why have they been financing private corporations and at the same time as holding out the begging bowl for public money to support a financially failing business. Yet on the other hand they appear to be financing and picking winners in the private market, which of course is what happened with the Gunns model and led to the collapse of the industry.

Louise Saunders: Well, I come back to the mill itself, because there are issues raised by the other side in terms of the industry. But in terms of the deal that’s been done, I guess, who owns the quota that, ahh…you referred to; were you able to get an answer on that today then putting that to the Minister in the Parliament?

Kim Booth: No, no… no, look I’m not satisfied at all. And I’ll be pursuing this in coming days and weeks and maybe some months, because, you know, as I pointed out there, it really does pose some serious probity in the way Forestry Tasmania has been conducting its affairs and it really justifies intervention by the Government; the owners, after all, are the people of Tasmania. And disaggregating and disempowering this Agency that just seems to be thumbing its nose both government policy, community aspirations and of course the IGA. Because currently there is a dispute, ahhm … with regard to whether there’s, first of all, sufficient sawlogs to maintain the quotas that are currently provided. But 40,000 cubic metres of sawlog, ahh… which is coming out of the highest conservation value forests in Tasmania. I mean, let’s be clear the Minister said today that he would be providing Category…, that Forestry Tasmania would be providing Category 1 sawlog; that’s old growth material, ahh… out of old growth forests to this, ahh… to this mill.

So in terms of trying to get this industry on a sustainable footing with some form of… kind of market acceptance and social licence, you’re not going to get it by providing this type of log supply, and it would to enable the IGA to proceed.

Louise Saunders: Depending on who holds the contracts for the sawlogs it might actually not be possible to include that as part of the IGA process if they are not willingly surrendered, I would think perhaps.

Kim Booth: Well, this is the point and it begs the question, is why Forestry Tasmania has been able to simply go ahead and either pre-empt the IGA or interfere in process when it was known there was, you know, federal money on the table for sawlog quota buy backs. Ahhm … that forestry if in fact have now on-sold that ahhm … sawlog quota to, ahh… Neville Smith. Then that raises a very serious question mark of how could they been able to sell that quota? What, you know, what value have they got from it and why is it that they’re still holding out their hands now for more public money. I mean, recall they’re going to lose $35 million of public money this year; that’s what they’re calling out for. And yet here they are financing a private company to operate apparently a sawmill owned by, by ,ahhm… Forestry Tasmania themselves.

Louise Saunders: Well,Forestry Tasmania has a new Board chairman of course and new members of the Board. Is this the new direction you expected to see from Forestry Tasmania?

Kim Booth: Look, certainly not. I expect this was … this sort of grubby deal was done some time ago and I’m expecting Mr Annells to come out and explain exactly what’s going on here and it maybe that the, ahh … that it can be undone. I mean I’m not entirely sure what guarantees; what the process is and so forth and what risk profile these is to public monies involved in this deal as well.

Louise Saunders: The reason I ask about the mill itself is because the Forest Industries Association has put a statement out today saying that, ahh … the complete opposite of what you’re suggesting. Saying that the retention of the mill is actually crucial to the ongoing success of the IGA discussions because of the relationship it has and integration with the Ta Ann veneer mill

Kim Booth: Well, you know, one of the biggest impediments to the IGA proceeding of course is the fact that Ta Ann is being deliberately provided logs from native forests rather than plantation or, ahhm … [from] other log sources that are outside the contentious areas. So in actual fact what FIAT are doing, is doing what they’ve been doing for a long time; to, in their own way, try to get access to public funding, but at the same time not agree to the conditions that’ll be imposed as a result of the IGA where public money is involved. So, I think FIAT have been playing a double game here and the question it also raises is, if Forestry Tasmania are now the owners of the sawmill, are they, in fact, de facto members of FIAT?

Louise Saunders: Well, what also does it mean too for the future of the process by which the federal governmentis offering money through exit packages to local sawmillers. Do you have concerns that federal money could go perhaps to … to close down this mill again?

Kim Booth: Well, look that’s highly likely. I mean at the time when Gunns closed that mill and stopped operating it, because it was financially unviable, I did make a proposition that that quota … the 40-odd thousand cubic metres [per year] should have been, ahhm… retired. The Crown should have stepped in and actually retired that quota. Now they [the Government], for some bizarre reason, chose not to. For $3 million at that time the quota could have been acquired and the mill could have been sold off and, you know, relocated somewhere else or, put in, ahh … plantation-use somewhere else; not within the Southern forests. I mean you’ve gotta remember that the whole Ta Ann deal at the Southwood site was a deliberate, provocative move by the Lennon Government to use a whole lot of public money, effectively lock up those forests for logging into the future and to prevent those High Conservation Value forests from being able to be put into proper reservations, that globally they deserve.

Louise Saunders: Is there any economic argument to preserve jobs within the forest industry in the south of Tasmania that would be in favour of seeing this mill re-open, and operating; using its quota and continuing to support, as you say, the Ta Ann mill?

Kim Booth: Look, I would be very surprised if that mill could stand on its feet financially without, ahh … cross-subsidisation. And here we can clearly see that the private market was not able to buy that mill – because presumably the business case didn’t stack up. Forestry Tasmania have now interfered in the market again by purchasing a mill. And I’ve no doubt this is being leased out at below value, or the wood flows into that mill are being provided below the cost of production. Which ultimately, at the end of the day, if public monies are used to interfere in the market like this, in means that private growers all around the State who might wish to manage their forest properly – to not clearfall them – to do single stem harvesting and to go under a higher certification model such as Forest Stewardship Council; they simply can’t survive. It’s just not worth growing a tree in Tasmania, because Forestry Tasmania comes in every time and cuts your lunch using public money and destroys any value, in the wood flows.

Related …
• The Conversation: Organised crime, illegal timber and Australia’s role in deforestation