Timberland asset management company Forest First is looking to raise $20 million in equity and $15 million in debt for its Colombian plantation, which was recently backed by a strategic investment from a global paper and pulp company.
The unnamed global pulp and paper company has committed $10 million in equity to the project this year and intends to provide $35 million over the next four years, according to Forest First chief executive officer Tobey Russ.
Forest First has raised and invested $26.6 million for its plantation since 2009, mostly from high net worth individuals in addition to the company’s founders. The recent strategic investment of $10 million brings total investments for the Colombia-registered company to $36.6 million.
In addition to its investment, the pulp and paper company has also agreed to buy up to 2.5 million tonnes of wood material a year, as well as provide technical assistance in planting trees best suited for the characteristics of the plantation. The company is investing in Forest First as part of an effort to determine whether it will construct a new pulp and paper mill in Colombia, according to Russ.
Forest First, which two years ago was aiming to raise $135 million for the project, is hoping to attract more investment. With backing and an offtake agreement from the pulp and paper company, Forest First aims to raise $180 million over the next five years, on top of the $35 million it is targeting this year.
Forest First has 23,000 hectares of titled land in Colombia and ultimately intends to buy or control a further 175,000 hectares. The Colombian company, from which investors are to be offered unlisted shares, was previously described by Russ as a “forestry start-up with projected returns of more than 20 percent”.
It now says it has a first-mover advantage for scaling up operations in the country, where investors have been eyeing up agricultural and forest opportunities as a preliminary peace deal was hashed out between the government and guerrilla army FARC. Earlier this month, Colombians rejected the draft agreement in a national referendum, but investment firms targeting Colombia have insisted they still have faith in the peace process and increasing stability in the country.
Russ told Agri Investor that the improving political conditions in Colombia support the establishment of a forestry sector that can be a source of sustainable development for the country and attract investments from development finance institutions. He said that the Colombia’s low population density, high quality soil and rainfall levels leave it well suited for the type of high-yield, fast growth forestry that has flourished in neighboring Brazil.
“If you were lay out all the characteristics you would hope for in putting a forestry operation together, Colombia would win on literally every one of those criteria, with the one exception of infrastructure,” Russ said. “Because it is so remote, they don’t have the roads, the electricity or the mills there already, but that will come over time,” he added.
Clare Pennington contributed to this report.