Why our Investors are hot on carbon forestry investment
Introducing Ngatoka, the fifth forest property of the fund
Ngatoka is a 262-hectare property (subject to survey) located to the east of Masterton in the Southern North Island and 129 from Wellington Centreport. Ngatoka is perfectly positioned between three other RDNZ forests and will benefit through those economies and enhanced access. The vendor is undertaking the subdivision and we have conveniently contracted the ability to plant the property prior to settlement. Ngatoka will be planted this month, with 184.3 hectares effective for forestry, 94% targeted for production forestry.
The option to plant this year offers exceptional value to the fund, both in terms of the time value of money, as well, prior to any potential changes following the ETS review, foreseen to offer significant value to existing investments.
The property has received an independent land valuation 16.3% above our off-market purchase price, and the independent forest feasibility has produced a Net Pre-Tax Forecast Internal Rate of Return (IRR) of 7.4%, based on a 20-quarter log price series and a gross carbon price of $56.30 NZU.
Since agreeing to purchase, we have witnessed positive reinforcement for the New Zealand Emissions Trading Scheme and a subsequent recovery in the price of carbon credits, currently holding around $61 NZU.
We are pleased to add a new forest region to the fund, with five properties now held across four premium forest growing regions.
The sixth property of the fund, Kinloch, currently undergoing due diligence.
RDNZ has taken the opportunity to negotiate the conditional purchase of Kinloch, a 292-hectare property in the Central Hawkes Bay, 98km from the Port of Napier with other domestic sawmills nearby. The property is mostly easy and medium contour and preliminary independent information appears favorable. Kinloch has been analysed to contain 245 hectares effective for forestry.
The negotiation of Kinloch has happened over the previous months; however, the immediate benefit of Kinloch, like Ngatoka, is our ability to plant in the 2023 planting season. We are working through satisfying our Due Diligence, and our forest managers (FMNZ) are working through those planting logistics right now.
The property neighbors another RDNZ property that is currently going through its acquisition process, the neighboring property can offer further economies and access advantages for Kinloch. Should we proceed to purchase Kinloch, the effective forest area of Awatea would climb to 1,687 hectares, already one-third of the target fund size.
We will update upon any milestones being met for Kinloch in the coming weeks.
Why now’s a great time to invest in Awatea Forest Fund.
As recently communicated, RDNZ has been heavily engaged in the current Emissions Trading Scheme review, leading discussions with politicians, sector heads and forestry businesses. Reflecting, we are confident that forestry maintains a major role to play in New Zealand’s climate initiatives, and that investments made now are likely to continue to receive favourable treatment under the Emissions Trading Scheme going forward. Hence, RDNZ has a strong bias to acquire and establish forests such as Ngatoka and Kinloch mentioned above.
The carbon price at the completion of the June quarter (the most recent revaluation) was $41, materially down on today’s price. The price of carbon directly impacts the value of carbon credits held by the fund, if sustained it would amount to a positive adjustment for the September quarter.
Over the long term, we believe the growing demand for wood products and the increasing drive toward climate responsible investing, will continue to drive returns to the fund. Awatea is ideally positioned to benefit from these changes, offering investors the ideal forestry investment platform that diversifies across forests, species, age-classes, and revenues.
Forestry is unique, it is tangible and renewable, proving to be one of the most powerful intergenerational investments.
Awatea has current net assets of $19.97 million and is held across 151 unique investors.
To find out more or to join the family of Awatea investors, speak to the team today.
