New-look Tasmanian forestry business
TASMANIA’S MAIN forestry operations are in for a major shake-up following the Government’s move on Forestry Tasmania ... there will be a new name, a leaner staffing plan and more self-reliance.
From 1 July next year Sustainable Timber Tasmania will be the new operating name, but, according to Minister for Resources Guy Barnett, it will remain a GBE but will be downsized and will be leaner, more efficient and more agile and will have a more defined commercial focus.
The Minister said the Government accepted the advice of the Forestry Tasmania Board that while the required wood volumes are in fact available on the Permanent Timber Production Zone, a significant volume cannot be harvested commercially at current prices.
“This is because of factors such as the quantity and quality of wood, the distance to market, cost of harvesting, and the cost of new road construction for coupes that are not readily accessible from the existing road network,” Barnett said.
The Government also accepted advice from the Board that even after substantial recent contract price increases including built-in escalation clauses, it would not be possible for the business to meet its full supply obligations at a commercial rate of return for the foreseeable future.
“The Government does not accept that the answer lies in a return to perpetual subsidies or other assistance to support FT’s commercial operations. Tasmanians are entitled to expect that industry pays its own way for the public native forest that it utilises.
“The Government recognises – but does not accept - the Board’s advice that a commercial solution would be to sell all of the hardwood plantations, accept a consequent reduction in the sustainable yield from the Permanent Timber Production zone, and use proceeds from the full sale of plantation to compensate mills for the cutbacks.
“This would significantly impact jobs and families, particularly in regional communities, and would be directly contrary to the Government’s plans to grow the industry. It will not happen under this Government.
“The Government is not prepared to impose a reduction in wood supply to industry and give rise to wider sovereign risk concerns for the Tasmanian economy.
How obligations are met
“This is not about whether wood supply obligations are met – it is about how those obligations are met.
“The Government will not reduce the legislated requirement for Forestry Tasmania to make available 137,000 cubic metres of high quality sawlog to its customers and it will not support proposals that would see the business unable to honour its current wood supply contracts,” the Minister said.
The Government previously announced that Forestry Tasmania would divest so much of its hardwood plantation assets as is required to support its operating deficits over the transition period, subject to appropriate due diligence, including impact on sustainable yield and certification.
That due diligence process has been completed with the assistance of Sale Advisors Gresham Advisory Partners Limited. FT’s estate is extensive and consists of various grades of plantation estate, with around 20,000 ha managed for sawlog production post 2027. “This is an important part of the sustainable sawlog yield and for that reason we have determined to retain it. By doing so – in conjunction with other resource changes we are making - there is no question about the sustainability of the legislated requirement to make available 137,000m3 of high quality sawlog each year, and therefore no detriment to certification,” the Minister said.
Pulpwood plantations sale
The Government agreed that FT would pursue the sale of only the remaining pulpwood plantations. Further details will be released soon, but the Government’s view is this will involve the sale of a long term forestry right – in the order of 99 years.
In line with earlier commitments, there will be no outright sale of land on which the plantations are standing.
FT also owns around 6,000 hectares of former farm properties which it purchased on a freehold basis for plantation conversion. These will not be part of the long-term forestry rights sale, but the Board will retain the option to consider further whether a return to agricultural use may be appropriate for these properties at a later time.
While it would be unwise for the Government or Forestry Tasmania to set a price expectation for the approximately 30,000 hectares of plantation resource ahead of the market process, the intent is that sale proceeds are used to repay debt and help fund the transition period as the business moves to a commercial model.
On the subject of special timbers, the Minister said access to special species timbers had been significantly impacted by creation of new reserves, including the 2013 extension to the Tasmanian Wilderness World Heritage Area.
“The Government will proceed with the currently legislated program to allow access to the FPPF Land from October 2017, subject to a new Special Species Timbers Management Plan which is currently under development.
“The Government also will request the business to consider the opportunity for special species timbers access to around 340,000 hectares of the Permanent Timber Production Zone which is in informal reserves or otherwise unavailable for commercial eucalypt harvest. Any such access would of course need to be considered by the Board in the context of the current application for FSC certification.”
Minister Barnett said that in coming to its decisions over the future of the public forestry operating model, the Government was conscious of ensuring the forest industry, including the private forestry sector, continued to grow in Tasmania.
“It is therefore Government’s intention to consult with the private forest growers and managers in the coming months, over the role and functions of Private Forests Tasmania and what, if any, further reforms are recommended.”
“The Government is not prepared to impose a reduction in wood supply to industry and give rise to wider sovereign risk concerns for the Tasmanian economy.”
■ Guy Barnett, Tasmanian Minister of Resources.