$2.026 Billion Sale of Forestry Corporation Completed

The Government today sold its shares in Forestry Corporation of New Zealand Limited to a Fletcher Challenge Ltd consortium in a deal which valued the assets at $2.026 billion, Finance Minister Rt Hon Bill Birch said today.

This exceeds the book value of $2.024 billion and is a very good price.

Forestry Corporation carries $426 million in debt and other liabilities. After covering that, the net proceeds to the Crown will be $1.6 billion.

Once we have received the cash, we will use it to eliminate the Governments net foreign currency debt. This will save taxpayers about $144 million a year in debt servicing.

The Government will move to zero net foreign-currency debt for only the second time since 1857.

The Fletcher Challenge-led consortium bid the highest price in a sale process open to all comers.

The consortium comprises Fletcher Challenge (37.5 per cent); Brierley Investments (25 per cent); and Citifor, a subsidiary of China International Trust and Investment Corporation, (37.5 per cent).

The consortium received no special tax concessions. Forestry tax laws are clear. Fletcher Challenge and its partners have no special ability to reduce Forestry Corporation-related tax.

The Government required bidders to submit their processing plans.

Fletcher Challenges commitment is to invest $260 million over the next seven to eight years in new state-of-the-art wood processing facilities to place New Zealand at the forefront of the world timber industry, Mr Birch said.

More than 22,000 Forestry Corporation logs are currently exported raw through the Port of Tauranga every week.

Fletcher Challenge plans to process in New Zealand both Forestry Corporations and Fletcher Challenge Forests own current saw log exports.

Mr Birch said Fletcher Challenge estimates that its investment plans will create up to 700 jobs directly, and more jobs through additional economic activity throughout the central North Island and the Bay of Plenty.

The consortium expects to generate an additional $200 -- $260 million each year in export earnings.

Fletcher Challenges plans include a world-scale solid wood processing plant in the central North Island. This would incorporate sawmilling, veneer mills, a laminated veneer lumber mill and wood remanufacturing facilities.

Fletcher Challenge also plans to modernise the Waipa large and small log lines and to modernise its own Taupo sawmill.

Mr Birch said the sale is an important new step in the development of New Zealand's forestry industry.

We already have a world-wide reputation for planting and growing trees. This sale and the plans of the new owners will help entrench our reputation as a world-class processor and marketer of timber.

Forestry Corporations principal assets are cutting rights to 188,000 hectares of mainly pine plantation forests in the central North Island 12 per cent of New Zealand's plantation forests.

Forestry Corporation owns the forest crop, not the land on which it is planted. The land is still owned by the Crown and will not be sold.

These forests are a crop like any other they were planted to be cut down, processed and sold. Crown forestry licenses have been amended to require the consortium to replant the forests after harvesting.

At the current rate of planting around the country, new forests equivalent in size to Kaingaroa are being created every two years.

Fletcher Challenge has the money and expertise to make the most of the crop. The sale is a major step towards the vision of an integrated wood processing industry for which these forests were planted.

Mr Birch said the Government has ensured continued public access to the forest for recreational purposes.

Fletcher Challenge has committed to supply wood to domestic wood processors at market rates. All existing contracts with local processors will continue to apply.

Maori claims under the Treaty of Waitangi for any land on which Forestry Corporation trees are planted are protected by law. These claims will not be affected by sale, Mr Birch said.