Tasmanian Times


FT’s coming of age?

Forestry Tasmania has changed its image to Sustainable Timbers Tasmania … so, will it be more ‘sustainable’ … ?

… unlikely: Rob Blakers’ shot of an FT burn in the Plenty Valley in April 2012

Extract from an article by John Lawrence published in the Mercury Tuesday, 16 June 2015

… Resources Minister Paul Harriss’s plan to sell Forestry Tasmania’s hardwood plantations does not address the losses from native forests. They haven’t caused cash flow problems as they have mostly been funded by grants.

Selling plantation simply raises cash to fund operations while it conducts due diligence on the rest of its loss-making activities, which have been obvious for many years.

When Forestry Tasmania emerges from its transition in two years’ time, its negative net assets won’t be any different.

It will have fewer assets with the sale of the plantations and a lower bank overdraft as a consequence.

Worse still, it will emerge without the plantations it has spent over $200 million to acquire, hoping to transform its operations on to a sustainable basis and to supplement the mandated future supply of sawlogs.

It is completely bizarre.

We have spent years trying to establish the sustainable harvestable levels from native forests and plantations owned in the public interest.

The problem is low prices to a cosseted industry, in some cases via long-term contracts that sell native forests at close to cost.

Forestry Tasmania appears to be in de facto administration with a Treasury representative proposed to sit on the board.

Just how will Forestry Tasmania’s post-2025 sawlog requirements be supplied as mandated when the plantations funded by the Commonwealth for this very purpose no longer belong to the government business?

The unforgivable delays in reforming Forestry Tasmania mean change to achieve positive cash flows and growing net assets, required for a sustainable forest company, is nigh impossible.

Future options are vanishing, and the loss of hardwood plantations will weaken it.

Well the great financial Whiz kid Barnett has managed to sell the plantation trees grown and funded by $200 million of Federal public money by virtually gifting them to the purchaser but even then only with the valuable carrot of a 99 Year lease over public land and no costs.

This lease cannot be worth less than $500 an acre or half the contract price of $30 million for the 72,000 acres yet amazingly it is —–approx. $450 an acre.

This price is for five generations of ownership contracted with possibly no costs to the lease holder, further is it rate exempt with all roads maintained by the taxpayer.

No wonder this contract will be deemed by the Pollies commercial in confidence and hidden from public view.

If I am correct Barnett has sold the trees for 15% of the cost of planting as funded by the Australian taxpayer to Cayman Island Company.

What say you Barnett?

How were the wheels of commerce oiled in this deal?

Who were the Tasmanian lawyers and financial advisors who gave Barnett the go ahead?

What does the Board of Unsustainable Timber Tasmania have to say?

Will they all resign en masse?

Will the Mercury put these questions to Barnett … ?

Originally published in TASFINTALK here

• John Lawrence in Comments HERE: Claire (#6) it’s not a lease. It’s worse than that. It’s a forestry right pursuant to the Forestry Rights Registration Act 1990. The Cayman Islanders get the right to use 29,000 hectares of land for 99 years. They don’t pay rent. The upfront fee gives them the rights to the existing timber plus use of the land rent free for 99 years. Gordon at #2 is wrong, I think, they will pay rates. When you’re paying $2k per hectare for a right to use land for 99 years rent free you are, in effect, paying about $1,500 per hectare for the land. Think of it as prepaying rent for 99 years. In $ terms a 99 year right is not much different to a freehold interest. That leaves $500 per hectare for the trees, average age over 10 years, which would have had an establishment cost of $3k per hectare plus the holding and maintenance costs since then. Guy Barnett argues it’s a good deal. Actually FT or STT or whatever it’s now called doesn’t own the land so only $15 million (or 25%) of the sale price belongs to it. That’s $15 million for a crop that probably cost $100 million to establish. Guy won’t tell you exactly. The original cost has been lost in the system.The remaining 75% is for the disposal of an interest in crown land. If it ends up being left in STT it’s a defacto subsidy. The government has disposed of a non STT asset, in this case a 99 year interest in Crown land, and will put the proceeds , or most of it back into STT. That’s a subsidy. And a 99 year forestry right is for all intents and purpose the disposal of freehold crown land. Only the sanctimonious would argue otherwise.

Guy Barnett: Plantations sale a huge winner for health, jobs and the economy

Mercury: Big blue as Tasmania’s pulpwood forestry plantations sell for $60m A DEAL to sell Tasmania’s 29,000ha of pulpwood plantations for $60.7 million has been described as a strong outcome by the State Government — and a “fire sale” and “rip-off” by opponents. Questions have also been raised about the company, which Parliament heard had been registered only two months ago and had a parent company listed in the Cayman Islands. The long-awaited deal was announced via a Facebook post by Resources Minister Guy Barnett, who was criticised by the ALP and Greens for not fronting the media to answer questions …

Labor: Government spinning hard on dud timber deal

Guy Barnett: Government invests in health while Labor wants more forest subsidies

YESTERDAY on Tasmanian Times …

Vica Bayley Media Release: Plantation fire sale a short-sighted subsidy for Hodgman’s native forest logging

Author Credits: [show_post_categories parent="no" parentcategory="writers" show = "category" hyperlink="yes"]


  1. john lawrence

    September 21, 2017 at 12:54 pm

    Ted (#18) you use terms that I don’t always understand, like ‘tax financial statement’ and ‘annual debt’.

    How much FT loses each year is not a mystery. It’s all there in the financial statements.

    From a viewpoint of sustainability what’s important are the cash losses. These are readily seen from cash flow statement which if you’ve read any of my blogs over the years is the thing I focus on.

    The other aspect that results in accounting losses are the non cash items, changes in the value of trees for instance, changes in liabilities like unfunded superannuation for example.

    The cash amounts and all the non cash adjustments go together to make up the income or profit and loss statement. The bottom line from this statement is often used as the headline figure for FT’s performance each year.

    FT has over the last 10 years suffered cash losses, primarily because it sells timber too cheaply.

    But in addition via all the non cash adjustments it has suffered what I call balance sheet losses. It has a tiny balance sheet compared to what was handed over 20 years ago from the old Forestry Commission.

    Mr Barnett thinks he has transformed FT into a springboard for the future. Most observers familiar with insolvency operations see it as more akin to a wind up.

  2. Ted Mead

    September 20, 2017 at 4:03 pm

    #20 – Pundits or no pundits, I’m asking questions and nobody seems to know the answers, or don’t want to disclose it.

    ! will stand by my statement that FT/STT are losing more than $1 million annually.

    I am also willing to retract that proving someone can prove I am incorrect, which doesn’t seem to be the case!

    The real $ debt may even exceed my wildest beliefs!

  3. Jack Lumber

    September 20, 2017 at 12:44 pm

    re 18 Ted I actually applaud your quest but really matters such as TFES and roading . You just provide ammo for pundits to mention you have no idea
    KISS and we all get to the bottom of this and then nothing will change

  4. Russell

    September 19, 2017 at 1:36 pm

    This is no less than fraud.

    A National Corruption watchdog is required to oversee Governments and their Departments to make sure that the public does not lose money or property, especially to oversees interests.

    I thought that was actually treason.

  5. Ted Mead

    September 18, 2017 at 8:19 pm

    Ah John – I think I should have clarified that as FT’s last years tax financial statement, which seems is due to be disclosed in November.

    One of the uncertainties that nobody has been able to put a figure on is the exact amount is how much FT/STT has lost in the past few years.

    I could use a more accurate figure in a response leading up to the forthcoming election.

    For example a tax statement debt doesn’t include all debts/ taxpayers expenses when other funds are not directly accountable to its direct business operations.

    How I read it – as per last year.

    $67 million – STT 2016 audited loss
    $6 million – woodchip logs transport subsidy (originally stated @ $11million)
    $12 million – road maintenance ( titled tourism access)
    $16 million? – government absorption of STT’s superannuation liabilities.
    $ millions – Forest regeneration burns ( now undertaken through the fuel reduction burning program)
    $ millions – forestry export freight subsidies

    Annual Debts = More than $100 million

    Obviously in the past (softwood) and present (hardwood) the sale of plantations has probably reduced the overall debt by about $200 Million in my calculations.

    There may be even more creative forestry accounting that I am unaware of?

    Is it fair to quote such accumulated costs as a contribution to an overall taxpayer debt?

  6. john hayward

    September 17, 2017 at 9:57 pm

    Daylight robbery though it is, it is still a better deal than the Land Swap fraud, which had zero return to the public purse. But we are still a certified kleptocracy.

    John Hayward

  7. john lawrence

    September 15, 2017 at 11:43 pm

    Ted (#14) not exactly sure what AG reports you’re referring to. Each year AG reports to parliament on every GBE/SOC. Usually late Nov. Available on line via the audit.tas.gov.au site. The reports aren’t particularly informative. Only a few obsessives read them. AG did prepare a special report in July 2011 on the Financial and economic performance of FT which covered the period since 1994 if you’re interested in history.

    The deal is nothing new. A 50% interest in the FT’s softwood plantations (46,000 hectares) was sold via a forestry right 20 years ago, and the other half of the forestry right sold, maybe 6 years ago to clear the then debt of about $40 million.

    Selling assets for less than they’re worth is something that FT specialises in. It’s been doing it for years. Nothing new.

  8. MjF

    September 15, 2017 at 10:01 pm

    Don’t know of lumbar’s movements.
    International man of mystery.
    W Boeder also AWOL in these times of uncertainty. Maybe tied up still with his VDL enquiry.

  9. Ted Mead

    September 15, 2017 at 8:56 pm

    Yes John – It seems to be a fiscal dog’s breakfast now after the Liberals dodgy deal of the century.

    I’m no number cruncher, but even I can see that there is going to have to be even more creative accounting and dubious money transfers to get STT to even looking like being solvent.

    STT seem to have sold off everything now that could have ever given them some form of $return.

    We still haven’t learnt how much FT lost over the last financial year, which usually is disclosed in October. One would bet the liberals are going to withhold that until after the election.

    By the way John, is there any way of obtaining the Auditor generals FT report now?

  10. Robin Charles Halton

    September 15, 2017 at 8:10 pm

    #4 John Lawrence, that is what I was wondering too, so STT retains its more valuable pruned and thinned HWP of approx 25,000ha established under Federal funding.
    The thinning has to continue to obtain the best
    growth rate from the retainers until the final crop of possibly 125 trees / ha to be cut at year x for product x ( was intended to be sawlog !)

    I would have to check that with a SST employee to establish the current forecasted usage of the end product.

    The Forest Industries Assn of Tasmania has welcomed a government deal to sell 29,000ha of pulpwood plantations to Reliance Forest Fibres for $60m

    Association CEo terry edwards said the $60.7M investment by a new player in tasmania’s forest industry reflected positively on the sector.

    Global Forest partners is an international forest investment advisory firm with global holdings in Australasia and Latin America and has held investments in Australia since 1999.

    Mr Barnett told reporters that independent advisors had estimated a sale value of betwween $1500 and $2000/ha and the $60.7 M deal was “at the top end of the expectation and its a great result”.

    Does anyone know what has happened to Jack Lumber who usually is one up on the rest of us, what do you understand Martin as I am keen to engage on what will now be the harvest and further usage of the site during the 99 lease,a replanting plan to maintain presumably export pulpwood supply for the period!

  11. Claire Gilmour

    September 15, 2017 at 4:20 pm

    Remember Bacon’s conversation with Peter Cundall …

    “you’ve no idea how powerful these bastards are …”


    When you link in what’s going on world wide in forestry, Tasmanian Cabinet is small fry. Just a tiny cog in the wheel.

    Who wants to play with the little boys when you can play with the big boys …

    More investigative research into UBS, Global Forest Partners and their affiliates required.

  12. Chris

    September 15, 2017 at 3:13 pm

    This has all the hallmarks of a “bezzle”, as described by John Kenneth Galbraith in Capter VIII of his classic volume, “The Great Crash 1929”:

    “In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.”

  13. Claire Gilmour

    September 15, 2017 at 2:50 pm

    Intel required … Someone who has the money and a business could join and get the intel …. !



  14. Claire Gilmour

    September 15, 2017 at 2:49 pm

    Research required – note names and links …


  15. Claire Gilmour

    September 15, 2017 at 2:47 pm

    Global Forest Partners selling NZ crown forest.

    Will this deal allow Reliance Forest Fibre or Global Forest Partners to on sell the Tasmanian Publics State forest plantations either in its entirety or divided up into separate lots?

    Where are the contractual mechanisms in place to ensure the government looks after the interests of the Tasmanian people and their environment?

    Will small rogue companies be formed to ensure the public, neighbours have little, to no form of redress?

    Will the states plantations be sold for burning in other countries? Global Forest Partners ceo has previously pushed this … burning for either cooking in 3rd world countries or iron ore smeltering.

    This brings into question corporate responsibility in regard to climate change.

    Are Global Forest Partners investment sharks in the global forest industry?

    “Global Forest Partners puts NZ forests up for sale

    Global Forest Partners LP (GFP) has put up for sale the plantation forests, freehold land and carbon assets held jointly by two of its New Zealand-based timber funds. The estate comprises 15 individual forests with a total net productive area of 16,533 hectares (ha), of which 30%, or 5,015 ha, is freehold.

    The estate’s remaining 11,518 productive hectares are managed under Crown Forestry Licenses (CFLs). As of 31 March, the net stocked area was 16,193 ha of which 88% was planted with Radiata pine, 9% Douglas fir, along with a variety of other softwoods and hardwoods. The estate’s age class profile is expected to support a sustainable harvest of about 470,000 m3 per year during the next 15 years, said GFP.

    As of 1 Jan 2012, none of the harvest volume is encumbered by sales contracts; rather 100% of the harvest output from that date is available for the purchaser of the estate to market as that purchaser sees fit. While it is GFP’s preference that the whole forest estate be sold to one buyer in a single transaction, GFP is prepared to consider bids for individual forests or groups of forests within the estate.

    One of the oldest and largest timberland investment management organizations (TIMOs), GFP currently manages a globally diverse US$3.0 billion portfolio of closed-end commingled timber funds on behalf of institutional and other qualified investors, its website states. Headquartered in Lebanon, New Hampshire, GFP has equity holders and investment managers located in Chile, Brazil, Uruguay, New Zealand, Australia and Singapore.”

    Source: forestweb.com


  16. Claire Gilmour

    September 15, 2017 at 2:33 pm

    Elders in WA sold 12,000ha of their plantations to Global Forest Partners for more than $45 million.

    “Company burnt by foray into forestry sector
    Haidee Vandenberghe – WA News
    Thursday, 1 November 2012 6:30AM

    Elders plans to exit the forestry industry within 12 months, selling off its assets and shedding its staff.

    The company bought Integrated Tree Cropping (ITC) in 2006, along with its thousands of hectares of blue gums on the South Coast, and ITC was later renamed Elders Forestry.

    Those plantations should have started to be harvested in 2008, but instead the company has walked away from its mature trees after conceding its forestry operations were haemorrhaging money.

    An Elders spokesman said its forestry operations had consumed $58 million over the past two financial years. By contrast, the company’s unharvested Esperance blue gum plantations has yielded no income.
    “Elders’ forestry operations have been unprofitable since the onset of the global financial crisis (GFC),” the spokesman said. “The total net loss from this sector since 2004 is approximately $460 million.”

    Earlier this week, Elders announced the rural services arm of its business would be put up for sale.

    A contributing factor was the continued underperformance of its plantations and debt sustained by its forestry assets.

    The writing was on the wall by 2008. Just two years after smashing the land sale record to buy Condingup property Linkletters for $32.5 million and spending another $18 million to buy the nearby Beef Machine, ITC revealed it had, in fact, decided to sell off both properties and was leasing back the trees.

    Elders still owns about 10,900ha in Esperance but intends to sell the land. The company has admitted the yield from its Esperance plantations has been disappointing.

    Not only have the trees been affected by what Elders described as ‘low rainfall’, beetles have damaged the trees. One 4296ha planting on the Beef Machine has suffered severe Heteronyx beetle damage. An investor report concluded a large proportion of the trees were showing no signs of recovery.

    In that particular plantation, established in 2006, the target yield was 275 cubic metres of wood per plantation unit by year 10.

    By last year – halfway to its first harvest – the average volume of timber for Esperance was just 42 cubic metres per plantation unit.

    It has also coincided with falling demand and prices for woodchips, causing Elders to write down its forestry assets at the end of last year from $524 million to $133 million.

    Since that time, the company has worked to offload forestry assets.

    A deal to sell 12,400ha of Elders-owned land to US giant Global Forest Partners was believed to have netted the company more than $45 million, leaving Elders with $75 million of remaining forestry assets.
    But Elders has not been the only company to watch its foray into the once promising woodchip plantation industry go up in smoke.

    In recent years, all of the once mighty blue gum companies – driven by investor dollars chasing tax incentives – have fallen.

    In 2009 the two biggest managed investment scheme (MIS) timber companies, Timbercorp and Great Southern, buckled under falling investments, a slump in the market and disappointing yields from their WA plantings. Rewards Group and Gunns have followed suit.

    New players have since come into the market to manage the thousands of hectares of blue gums, but with last year’s announcement that Elders would cast off its forestry arm, the last MIS blue gum player has effectively left the industry.

    An Elders spokesman said the company could no longer justify the “cash burn” the forestry sector caused.
    “Elders’ experience in forestry is but one aspect of an overall sector-wide collapse that has been playing out since the GFC,” he said.”


  17. MjF

    September 15, 2017 at 6:25 am

    #5 There’s always a plan requirement to do something with land post harvest.

    In this case a 99 year access term infers the forestry right holder will want to re-establish a crop.

    They can of course sow carrots if they decide to, not necessarily plant trees.

    One would reasonably assume at the grantees’ own cost but who knows in this deal.

  18. mike seabrook

    September 15, 2017 at 2:41 am

    33, What about land tax when after chopping the trees down the land is fallowed not farmed and left as waste land. is there a requirement to remediate the land or replant the land as part of the harvesting plan – or will that liability go back to the tassie taxpayer

  19. john lawrence

    September 14, 2017 at 7:18 pm

    One further comment.

    Half of the plantations sold (14,000 hectares) were Gunns’ MIS trees acquired from PPB, the liquidator for Gunns and Gunns Plantations, the Responsible Entity for Gunns’ MISs currently being wound up.

    These MIS trees were growing on public land pursuant to a lease. Needless to say there was rent owing when Gunns collapsed. FT tried to seize the trees in payment for the overdue rent but got hit with a $40m counter claim for receiving preferential payments from Gunns in the months leading to Gunns’ collapse.

    The government refuses to say how much they paid to settle the dispute and take over ownership of the MIS trees.

    The 29,000 hectares were a crappy lot, unpruned and unthinned destined for the now abandoned pulp mill . Even so there was at least 130 tonnes of timber per hectare with a stumpage value of $15 per tonne. Chopping ’em down will net $60m thus covering the purchase price, leaving 29,000 hectares rent free for 99 years.

    Great deal Guy.

    STT still has about 25,000 hectares of hardwood plantations on its books. These were established using Federal grants. Grants included amounts to cover pruning and thinning. At last balance date there was $19 million received but yet to be spent. This amount was missing from the cash tin as it was used to keep FT afloat and will have to be found from somewhere when its needed.

    STT has been emasculated. The Treasury boss has retired from the Board. Mission accomplished.

  20. john lawrence

    September 14, 2017 at 6:26 pm

    Mike (#1). There will be no land tax. The land will be classed as primary production land. Which also means the value of the trees, being a crop, as distinct from native forests, is not included in the capital value for rating purposes. In other words rates will be assessable on the land only and may, if we’re lucky, be sufficient to cover the costs of damage to roads and bridges when plantations are harvested.

  21. Gordon Bradbury

    September 14, 2017 at 5:26 pm

    Another $40 million dollar subsidy to the forest industry. Public servants operating sawmills. What a joke!! How long before we see this in Tasmania? Not very long I reckon.


  22. mike seabrook

    September 14, 2017 at 4:39 pm

    what about land tax ?? who pays??

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