Postscript to WORTH THE WAIT? A Look at the Auditor General’s review of Forestry Tasmania, following the release of Hansard of the Legislative Council 4th July hearing
The public transcript of the 4th July 2011 Leg Co inquiry into FT’s financial performance has now been posted on line.
In an answer in writing to a question on notice, it was disclosed that the minimum operating cash flow surplus for FT is in the order of $20 million, needed to fund necessary capital expenditure including outstanding TCFA obligations.
In 2010 the operating cash flow was $12 million negative. Bob refused to publicly disclose the cash flow deficit for 2011. He would only do it in camera. It is likely to be of similar magnitude to 2010, a far cry from what is needed.
The impact of these revelations cannot be overstated. FT is very close to insolvency.
Bob won’t have Hans anymore to support him. Hans has just done a Bartlett.
And then there was the disastrous confession from Bob that the value of FT’s trees had crashed ... yet again.
In Bob’s words:
“You might be aware that last year, for the first time, we underwent an external valuation ... they valued our forest estate last year at around $300 million. We got them in again this year to do a revaluation ... They have given us a valuation this year of $206 million, which is a reduction of about 31 per cent”.
I made a slightly facetious observation in my previous post (WORTH THE WAIT? A Look at the Auditor General’s review of Forestry Tasmania), that the time will soon arrive when the unfunded superannuation liability will equal the value of the trees.
Well that time is nigh.
What is owing in regard to unfunded superannuation is barely covered by the tree value.
All FT’s equity has vanished.
Sixteen years ago FT was entrusted with the care of the State’s forests. After spending over $450 million on new assets and plantations, half of which has been provided by the Feds, the trees are only worth $206 million. Details of this magnificent achievement are being forwarded to the Guinness Book of Records.
FT might survive in the short term, but it is highly unlikely that it can service its liabilities in the medium term without major reform.
• Earlier on Tasmanian Times:
Forestry Tasmania powers on with biomass plan. Is it because they have to ...
WORTH THE WAIT? A Look at the Auditor General’s review of Forestry Tasmania
The Inconvenient Truth: Forestry is in crisis
NICK CLARK | July 13, 2011 12.01am
GUNNS Ltd has told Forestry Tasmania it wants to terminate two major wood supply agreements signed in 2007.
Forestry managing director Bob Gordon said Gunns wanted to end the 20-year Long-Term Pulpwood Supply Agreement and the Saw Logs and Other Products contract from mid-October.
“Under the terms of the contracts, the two parties are legally obliged to negotiate in good faith about terms for new wood supply agreements,” Mr Gordon said.
“Gunns and FT began those negotiations at Gunns’ request.”
It is understood Gunns gave notice about its desire to end the contracts nearly three months ago.
Gunns has sought millions of dollars compensation from the federal and state governments under the Statement of Forest Principles process for handing back the two contracts.
The contracts were signed in 2007 when Gunns intended to use up to 1.5 million tonnes of native forest pulpwood in its planned Tamar Valley pulp mill.
The company has since announced an intention to use only plantation timber in the pulp mill.
Take-or-pay provisions in the long-term pulpwood supply deal are at the centre of a $10 million dispute between Forestry and Gunns that came to light when confidential evidence was mistakenly published last month.
The provisions specify Gunns must pay if it takes less than 85 per cent of the contracted 1.5 million tonnes of pulpwood a year, whether it takes delivery or not.
When the deal was signed in 2007, former premier Paul Lennon said timber products would be worth $200 million a year more under it.
Meanwhile, Mr Gordon said Forestry was disappointed that biomass from native forests products would not qualify for renewable energy certificates under the planned carbon tax.
Read the rest on the Mercury website ...