Tasmanian Times

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. No price is too high for the privilege of owning yourself. ~ Friedrich Nietzsche

Article

A fact’s a fact . . . now give it back!

Rob de Fegely, Chair, and Steve Whiteley, CEO, of Sustainable Timber Tasmania (STT) have never looked so happy. In the recent 2018 Annual Report, they reported STT has zero debt and $49M in net income.

How did they turn STT around so quickly? The simple answer is theft.

Casting integrity and transparency aside, they are in receipt of stolen goods – goods comprised of former MIS grower assets on state land. The Liquidators (PBB) and STT (formerly Forestry Tasmania) negotiated a secret deal, and are steadfastly refusing to disclose the terms of the settlement.

The STT Board will not respond or table the matter – see TT article “Invest in Tasmania – bah!”, 4th Oct 2018. The STT Executive, Minister for Resources, Guy Barnett and possibly their GBE partner, Treasury are complicit in making that deal.

To recap:

  1. MIS Claim for $39m for 14,000 ha of MIS timber on state land, based on establishment costs
  2. STT Counter Offer for $0 for those timber assets based on rental breach by GPL/Gunns
  3. STT ~ PPB Settlement, nefarious and secret for an estimated $1.4M scaled from $100/ha
  4. STT Sale for $60M for 29,000 ha of timber, including much harvest-ready MIS timber

And adding for a bad but pragmatic settlement:

  1. MIS Claim Worst Estimate for $39M discounted to $31.7M for related GPL liabilities
    Given MIS grower assets were already disclaimed by PPB for GPL, and GPL debts (not growers) were now a shared liability, and assuming GPL rent to STT (3yrs at $70/ha for 14k ha), and the contracted GPL 12% share of MIS harvest (or asset), to GPL for other debts(not growers) to STT.

The STT ~ PBB negotiation was not investigated in court, but, true to bad precedent, Justice Judd deferred to the commercial negotiation and settlement reached by the Liquidators, PPB Advisory. PPB have not met their fiduciary responsibility to growers. Insolvency practice should be added to the terms of reference in the Financial Services Royal Commission and a submission to that effect has been lodged there.

STT was so keen to realise the whole grower asset for itself, it forced the rental breach by not allowing any earlier sale or harvest. Over the last two years it has shifted as much of its hot goods as possible from growers’ harvest-ready lots. Meanwhile, it is holding onto the value-added lots pruned by growers, while the trees fatten up. As does the balance destined for future chipping. Ironically, the related Private Forests Tas is already bemoaning the lack of new plantation investment, and the gap in ‘inherited’ resource supply.

Growers have bailed out STT, but shamefully growers are to be satisfied with $100/ha, which STT is reselling for over $2,700 per hectare. Later woodchip lots will fetch 10% more and clearwood twenty times that. The figures could be tightened up, but roughly, growers were due $31.7M even after covering GPLs debts related to their lots. STT has the cash now they’ve sold growers trees, and $31.7M less ~$1.4M paid is $30,300,000 fairly owed to real investors in Tasmania.

This Government Business Enterprise should be beyond reproach, yet in action Sustainable Timber Tasmania mocks good governance. It reflects poorly on the Tasmanian government, and its unique way of doing business – by theft.

That was $30,300,000 . . . now give it back!

 

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20 Comments

20 Comments

  1. Inside Tasmania

    October 31, 2018 at 2:19 pm

    Very interesting, Trevor. We couldn’t understand why the plantations sold by STT to GFP front-company ‘Reliance Forest Fibre’ got FSC controlled wood certificates before RFF was even registered with ASIC.

    At least half of the money raised went into propping-up the collapsed Tasmanian Health System.

    https://www.insidetasmania.com/2018/08/inside-global-mark-certification.html

  2. Rob Halton

    October 31, 2018 at 7:27 am

    There was an article in the Mercury on October 15th by Ross Hampton who is the CEO of the Australian Forest Products Association!

    The suggestions were ‘Hopes are high for the revitalisation of the stagnating Softwood plantation industry” and “The commitment to plant one billion trees is very good news for the 70,000 Australians who work in forest industries … and good news for our children who will be building home.”

    As we know, softwood is the choice of housing construction.

    Unfortunately we hear little of forestry in the news unless it is bad news of that associated with MIS scheming and environmental damage here and there, then Forestry remains as a hush-hush subject particularly here in Tasmania where hardwood plantations continue to generate unclear objectives for any hope of high end timber products.

    Yes, it is true plantation grown softwood is an important contributor for the construction industry. Tasmania should reconsider the reckless Rolley days of HWP in overdrive and revert our forests plantations areas back into a reasonably large component of Softwood.

  3. Trevor Burdon

    October 30, 2018 at 6:50 pm

    Mjf – the mortgage comparison is a similarly tiered structure. There are assets in the form of rights. The MIS growers owned rights to the trees. The tenants owned their possessions in the rented property.

    The disclaiming of growers’ tree rights moved that asset to the Liquidators who assume the role of GPL while in Liqiudation, with GPL in its personal capacity. GPL owed STT. Furthermore, Gunns regularly swept GPL accounts to their own. At liquidation, Gunns owed GPL $84M from surplus grower fees, you can check the last matching audited Annual Reports for both from 2011.

    So an $84M GPL current asset was lost to Gunns’ secured creditors, preventing GPL from continuing independently. But why didn’t Liquidators PPB fight for the disclaimed grower asset, the tree rights, while settling the rent owed? Growers owed GPL nothing. If they did they had already forfeited their tree rights to Gunns Finance. If the scheme was no rent for growers, 12% of the harvest was GPLs – hence the generous assumption above for 12% across the whole MIS estate. Instead of lengthy action PPB negotiated in secret, forgetting their fiduciary Responsible Entity role to growers, and ingratiating themselves to another big corporate/GBE, thus repeating the New Forests/Forico fiasco. It was PPB’s accountability to find fair solutions with STT. As to growers going directly … you clearly have no experience of the insolvency practice of locking down all documents and grower registers, and slapping confidential on developments along the way, and redacting anything that may reach public eyes.

    STT was on the other side of that settlement negotiated in secret, and although they profess adherence to the highest standards of governance, they contrived to secure the grower asset … in effect receiving stolen goods. Roughly, tax aside, grower investors actually invested ~ $21.2M in state enterprises (~ 90%*14,000ha*$4,000/woodchip lot + 10%*14,000ha*$7,000/clearwood lot = $60.2M) in the state for MIS plantations on crown land. With ~$21.2M, therefore sitting with Gunns after establishment costs of $39M.

    STT is no better than PPB. This is not how any Tasmanian would expect an investor in the state to be treated. BUT, when they saw Gunns bank creditors socialising losses across growers they wanted in on a similar deal.

    (And let us not forget the existing native timber harvested on those plantation lands benefiting STT and Gunns doing the harvesting. I wouldn’t be surprised if the access and road improvements were subsidised by growers’ establishment fees as well.)

    STT is in receipt of stolen goods, and their Ministers, their Executive, their Board and their managers know it. STT are thieves.

  4. Mjf

    October 30, 2018 at 3:07 pm

    I don’t disagree Trev. Your final sentence says it all. STT is essentially just another farmer, and benefited. Did all the other farmers you speak of have to pay PBB agreed establishment and maintenance costs to assume tree ownership ?

    Did you approach STT directly to take over and maintain the lease payments on ground underneath your woodlots ? I would have tried that approach considering STT’s whole argument is predicated on rent default. As long as it was maintained in accordance with the lease, that should have been all that mattered.

    Likening this type of arrangement to a typical mortgage default situation is a poor comparison, Trev. For a start the tenant doesn’t own the asset. That’s an arm’s length deal between lessee and investor, and none of this landlord’s business in reality.

    I would agree STT lost the use of the land. Fair enough. Of course they did. Obviously they may have chosen to grow their own trees if the land hadn’t been rented out. Or spuds. Or sugarcane. Or anything else they deemed may have turned a profit for them. Leasing out didn’t turn out that way so much. Although under the Forestry Management Act 2013, STT is probably obligated to grow timber products on State Forest.

  5. Trevor Burdon

    October 29, 2018 at 8:36 pm

    Rob, closer yes, but the point is that the settlement made with the liquidators did not protect MIS growers’ rights. Irrespective of any high value-added product being produced, STT has contrived to pay almost nothing for MIS trees even after discounting for rent and allowing for GPLs shares to be transferred to STT. $31.3M is owed to growers. Any value-add is gravy for STT.

    Mjf … GPL and ultimately Gunns were liable for the rent. The trees grown were MIS growers’ asset. GPL/Gunns’ rent and share has been discounted in the final figure of $31.3M. A landlord does not own his tenant’s assets. Let’s say you owe your bank mortgage payments and the bank places you in default. Does the bank prevent you from selling your campervan in the driveway to make good? Does it then turf the tenant out and take all of the tenant’s property?

    The lease did NOT specify default of the tree rights. STT was prepared to argue that there was no net benefit to it because it lost the use of the land. That argument was not had in court. What else might STT, in the business of growing trees, have done .. other than grow trees on those lands? Even better take them without bearing any of establishment and maintenance costs.

    STT would not allow any sale prior to prevent the default, but contrived to work up its own sale effective immediately after a secret settlement. You yourself say there was a windfall .. STT said there was no benefit. I CALL BULLSHIT ..

    STT is so unsure of it’s position that it will not speak to the issue, or disclose who made the settlement.

    (Growers MISs on third party land were problematic because of multiple lease arrangements with separate landlords. PPB pleaded complexity and gave them away, which has a lot to do with whether they could extract their eye-watering fees. It speaks volumes to their lack of fiduciary accountability, competence and integrity. Many farmers have inherited a windfall, as Tasmania’s Tree Farmer of the Year has said. All those farmers, except where the land was unsuitable and plantations have failed, has benefited.)

  6. Mjf

    October 29, 2018 at 12:02 pm

    I would like to know why Trevor thinks STT was obligated to pay the liquidator anything at all for tree assets as a result of a breached lease. Have you seen the lease Trev, and can you confirm the relevant clauses that required the landlord to pay out agreed establishment costs prior to asset takeover ?

    I can see the logic in STT offering $0 to PBB … they probably didn’t have to offer anything. Why did Gunns not appoint an administrator to look out for grower interests, at least attempt to maintain some leases to maturity and keep the liquidator at bay ?

    How much of the 14,000 ha of ex GPL growers trees was lumped into the 60,000 ha STT plantation sale to GFP ? I’d be surprised if any pruned woodlots (unless totally failed) would have been included in the sale. There’s no doubt this was a huge windfall for the landlord, but it wasn’t their fault that the lessee defaulted. And naturally those investors got burned who were totally exposed to Gunns remaining viable for the duration of the lease.

    If your woodlots had been located on any other 3rd party leased ground Trevor, I doubt you’d have got anything back.

  7. Rob Halton

    October 29, 2018 at 6:56 am

    Trevor … re HWPs, I read into it that investors have disgracefully wasted their money, forest consultants, tax accountants and hangers on and riff-raff got their pound of flesh!

    Forico’s NZ based parent company snatched Gunns at a bargain basement price and can now afford to export standing HWPs as woodchips. Where is the prime high value forest product. On the main, it does not exist. If it does then someone is probably working the books.

    Trevor, am I closer to the mark?

    Guy Barnett is telling us that a Victorian saw-milling company (short of sawlog supply in Victoria due to threatened species such as the leader beater possum habitat being destroyed/altered by CBS regeneration operations) is being attracted to Hampshire Tas to produce eucalypt panels from the massive ex Gunns HWP resource. Could be a load of malacca!

    Is that actually going ahead, or is it speculation? As far as I know, the Hampshire chip mill is up and running as a chip mill, no doubt processing “thinnings” from the ex Gunns’ estate, and any thing else of HWP that is privately owned!

    Trevor, field operations, am I right?

    Government are being pretty cagey about HWPs with not much media attention. Too hard to unravel the financial mess that has evolved for smaller private owners, eh?

  8. Trevor Burdon

    October 28, 2018 at 7:13 am

    @Rob, do you have a view on the gist of my article? Input on that secret settlement and process, for example, and what you expect of your government acting in your name?

    It seems like you’re flooding the comment stream with your own story.

    • frank again and again

      October 28, 2018 at 8:35 pm

      What a sad mess –
      Frank called for and pointed to a plan C …

      But there was/is no support for that, so we just watch the whole lot continue with more of the same.

      There’s not much light or change ahead, it seems.

  9. Rob Halton

    October 28, 2018 at 6:20 am

    Pruned nitens, most of which is from Production zones, has been trialed again recently but is only 30 years old. From what I am led to believe the sawing is fine, but the problem still exists with drying which shows up the unsatisfactory wood properties of attempting to place a hardwood species as marketable too early!

    In my opinion the timber is still far too young to be cut for sawlog. STT is hoping for a return on its initial investment as well as incorporating some to replace dwindling supplies of native forest regrowth, but with anxiety building among the original investment for sawlog the disappointing result so far will continue for at least the next 20 years until the nitens stand attain some level of maturity similar to what one would expect of its native grown equivalent.

    I remain puzzled as to why FT under former CEO Evan Rolley ever wasted our time and energy in landing us with forests, that are basically useless, to be relied on to produce primarily sawn timber for general lines and furniture making. Better to have continued with native forest and pinus radiata forests.

    That damned world class pulp mill, over investment by Gunns, FT and private owners, has left us with a product that is only good for export woodchips.

    Even my second-best friends at Ta Ann refuse to use plantation nitens, instead targeting our potentially better native forest logs in a diameter class of 35cm-70cm, some of which if grown on would qualify as sawlog.

    With Ta Ann as a customer, the younger stands of native forest now have no chance of ever yielding sawlog down the track!

  10. Trevor Burdon

    October 27, 2018 at 8:22 pm

    @Paul, yes good suggestions but from previous experience they may not be resourced to deal with this. There is also the question of their remit with respect to GBEs versus Government Departments. Together with the Auditor General I’ll sound them out.

    @Rob, the fact remains that logs for woodchips are leaving the state at record levels, and among them are the MIS ‘inherited’ stolen logs. STT has resold them cheaply at $2000/ha, which is a pretty good turn on inventory of an unconfirmed $100/ha. These poor return and taking advantage.

    Scheme timber grown for clearwood includes blue gum as well as shining, and the best of is sitting in unsold production zones. Margules Groome, where Mr de Fegely hails from, is very busy researching and promoting LAM products. Don’t tell me that’s not related.

    @Pete, thanks, agreed! Perhaps our moderator can prune a few, and switch the WordPress comment order to most recent post first.

  11. Pete Godfrey

    October 27, 2018 at 9:07 am

    People seem to be missing the point in the article here. The point is that the State government and Forestry Tas (I don’t like their new misnomer) are complicit in stealing from plantation MIS investors.

    It is pretty obvious from what Trevor has written that the investors have been thoroughly fleeced. Unfortunately that is the way with all Ponzi schemes.

    When will the politicians who stood up and cheered when the MIS management schemes were being touted as the saviour of the world be brought to task for the billions of dollars of public money they wasted?

    • Russell

      October 28, 2018 at 7:20 am

      Yes Pete, there should be a Royal Commission, no different to that currently investigating the crooked finance sector.

  12. Rob Halton

    October 26, 2018 at 10:59 am

    That’s very much the case George, as I am much more familiar with CEO Steve Whiteley than I ever was with former CEO Bob Gordon who I had never actually met!

    With Evan Rolley I had a go in with him years ago as I openly believed the State was being conned into a false belief that HWP’s investment would replace NF and the need for SWP investment. I was right. He messed up badly by following Gunns’ lead as well as the expense of gambling with pruning Nitens for potential sawlog.

    As we know, HWPs have caused lots of pain for investors with still no reliable sawlog material forthcoming from the pruned stands.

    So far HWPs not only produce poor returns for small investors as marginal business still operates on a fine line of profit ( much of it due to the collapse of Gunns and subsequent changes of ownership) with the current export chip wood market into Asia.

    I often bump into Steve on the street and we have a cordial chat. It’s good to see his recognition of former staff with their contribution in the days of proactive forestry around native forests and radiata plantations, both of which have contributed to the state’s economy and social cohesion at community levels.

  13. Clive Stott

    October 25, 2018 at 11:01 am

    George, get with it. Brett Whiteley is not a Tasmanian politician.

    • George Harris

      October 26, 2018 at 8:52 am

      For once I agree with you, Clive…

  14. Paul Schlüter

    October 25, 2018 at 9:46 am

    Is this case suitable for the Ombudsman or the Integrity Commission to investigate? Insolvency practice needs to be included in the Financial Services Royal Commission.

  15. George Harris

    October 25, 2018 at 8:22 am

    Russell, Steve Whiteley, the CEO of STT, is not related to Brett Whiteley the Tasmanian politician.

    Steve comes from a farming family near the NSW/Victorian border, where the rest of his extended family remain. Steve came to Tasmania after university and pursued qualifications in forestry to work for the then Forestry Commission, or Forestry Tasmania as it became. I know him well, and he is a thoroughly decent bloke.

    Brett Whiteley the Tasmanian politician comes from a long established family in northern Tasmania, and they are not related.

    You may as well be asking if Brett Whiteley the politician is any relation to the late Brett Whiteley, the painter.

    • Russell

      October 26, 2018 at 7:55 am

      Brett Whiteley, the painter, doesn’t look anything like Brett Whiteley, the three time Liberal loser, while Steve Whiteley certainly LOOKS like he could be a very close relative.

  16. Russell

    October 25, 2018 at 6:28 am

    Is Steve Whitely, CEO of Sustainable Timber Tasmania (STT), related to Brett Whiteley?

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