NSW explores ‘A$1bn’ privatization of softwood forest

The New South Wales state government is exploring options for the potential privatization of its commercial softwood plantation business, in a move it said is consistent with its asset recycling strategy.

NSW treasurer Dominic Perrottet announced the launch of the scoping study last week, supported by the state’s deputy premier John Barilaro.

Forestry Corporation of NSW and its profitable softwood division covers around 230,000 hectares of radiata pine forests, which primarily produce timber for use in residential construction.

An Australian timberland investor told Agri Investor the asset was likely to attract “significant interest” from the market, as it is one of the largest single softwood plantations in Australia or New Zealand.

“We’ve seen two or three attempts by the NSW government to get a sale off the ground before which have stalled – there are a lot of political issues around these assets in rural areas, particularly around jobs, so we will be monitoring the situation to see how it develops,” the investor said.

The market source also pointed out that the NSW softwood plantation business was different to other plantations that have been privatized, such as in New Zealand, because its output is sold almost entirely into Australia’s domestic market.

“That could make it more attractive to some buyers, because you’ve got an Australian dollar asset selling into an Australian dollar market, so you have less volatility and don’t have to deal with currency,” the investor said.

Market sources told Agri Investor that a figure of A$1 billion ($671 million; €612 million) was “a good starting point” when trying to assess the asset’s value, but that it was difficult to be more precise at this stage.

Perrottet said the time was right to assess whether a long-term lease of the state’s softwood plantation was in the public interest, and cited previous success with infrastructure asset recycling in making the case to the public.

“NSW is the only state left in Australia still running a softwood plantation of significant scale, so it’s appropriate we take stock as a state and explore whether this is still the best approach for us,” he said.

“Our other asset-recycling initiatives, such as the long-term lease of the state’s electricity assets, have unlocked around A$30 billion for vital infrastructure across NSW, boosted economic growth and given us the lowest unemployment rate in the country.”

National Party MP Barilaro added that his focus during the process would be “the protection of regional jobs.”

Assets previously recycled by New South Wales include electricity distributor Ausgrid, which raised A$16.2 billion from a consortium of AustralianSuper and IFM Investors, and the state’s land registry business, which was snapped up on a 35-year lease by a consortium comprising First State Super, Utilities Trust of Australia (then managed by Hastings Funds Management) and RBS Pension Trustee.

The state’s transport minister, Andrew Constance, this year called for the federal government to formally extend the asset recycling programme, which has been resisted so far by treasurer Josh Frydenberg.