Southwood

What is all the fuss about? FT has been damned once again by the Greens as being “a rogue organisation” for “deceiptfully”(sic) purchasing the Southwood sawmill without advising the Minister, the media has labelled the transaction a “secret deal”, and the comments of both the Minister in Parliament (“I did not know of the deal until after it was done”) and the head of FT on radio (“We could have carried out better due diligence”) have been taken totally out of context.

So, what is the real story?

  • Southwood, which is sited in State Forest some 20 k behind Huonville, was established by FT as an integrated log processing operation to take logs from regrowth and plantation forests, much of which was otherwise destined for the chipper.
  • Logs brought to the site are separated into those which could be milled and those suitable for veneer. It is an integrated value-adding operation. One cannot really exist profitably without the other.
  • FT is the landlord – it leases land to both a veneer company (Ta Ann) and to a sawmilling operation.
  • The sawmill, with a contracted annual supply of 40,000 cubic metres, changed ownership a few times through mergers etc before being acquired by Gunns.
  • When Gunns decided it was going to withdraw from native forest operations, the sawmill was put up for sale.
  • It eventually found a prospective buyer in Dell Vista Forestry P/L, owned by a mainland-based resource company.
  • DV’s plan was to on-sell the green sawn product to Neville Smith Forest Products P/L (NSFP) in Launceston, to dry and then process into mouldings.
  • DV was finding difficulty in accessing funds from its other operations for the purchase within the allocated timeframe for the deal, and sought and was granted an extension of time.
  • Gunns was in debt to FT for around $2 million and was refusing, or was unable, to pay its debt until the sale of the sawmill went through.
  • FT was provided with a letter from the Commonwealth Bank, bankers to DV, advising that the funds would be available (what more due diligence do you need?), and on the basis of that advice, lent DV on a short-term basis an amount of $3.3 million, with the sawmill as security.
  • The sale of the sawmill was made (April 2012), Gunns was paid, and Gunns paid out its debt to FT.
  • DV was granted several short extensions to pay back the loan to FT, beyond the date originally agreed with FT.
  • All of this was known by the Minister, and he has acknowledged this to be the case.
  • Eventually, in June 2012, FT called in the loan, and acquired the sawmill. It advised the Minister immediately it had done so, and the Minister acknowledges this as fact
  • FT then entered into a commercial lease arrangement with NSFP, for NSFP to operate the sawmill. The terms of the lease are attractive to FT.
  • NSFP has indicated publicly an interest in purchasing the mill once the dust settles on any forestry agreement.
  • All parties to the IGA peace talks acknowledge the need for the sawmill and its allocation to be a part of the integrated operation at Southwood. WIthout it, the veneer operation would struggle to survive, and the veneer operation is recognised as being an essential part of any agreement.
  • The sawmill is presently operating, FT is supplying the contracted quantities of sawlog, and the integrated log processing operation has been maintained.
  • NSFP has protected its Launceston operation by securing its source of supply.
  • FT has protected its investment, it has recovered its debt from Gunns, and has entered into a satisfactory financial arrangement with the new sawmill operators (ie a lease with an option to purchase).
  • People continue to be employed at Southwood, and at the NSFP operation in Launceston.
  • The economy of the State has been protected from yet another blow if Southwood had been forced to close.

None of this would have happened if the deal had not gone through. And yet, the Greens cry foul. In what way has this been anything other than a good commercial deal? In what way has FT “gone rogue”? Why do the media blindly chant the Green mantra that this was a “secret” deal?

FT kept its shareholders (the Minister) fully informed throughout the process. The Minister knew what was happening, he was advised of the circumstances throughout the process, and of the deal as soon as it was done. Just like any Minister responsible for a government business enterprise.

Mr Booth, the Greens spokesperson on forest matters, has once again leapt into the fray to attack his pet hate, FT. And once again, his rhetoric, supported by his party, disguises the truth and exposes his real agenda.

Propaganda is no substitute for truth. The media should be much more circumspect regarding regurgitating the Green mantra as fact.

I say “Shame Mr Booth, Shame”