Redwood - Summary Redwood is an appearance wood, mainly grown in California. Limited supply. Existing buyers in the US. Fast growing species. High value species New Zealand (NZ) has excellent conditions to grow Redwood. Expect the same volume of timber in NZ at Age 30 as California at Age 60. Sale of NZ forestry originated credits can provide cash flow until harvest Commercial Scale plantation growing now underway in NZ. Rotorua, New Zealand 2
Redwood Timber Redwood is popular in the western United States for: interior panelling cladding decking and fencing Qualities of Redwood: heartwood has a rich red colour heartwood is resistant to rot it absorbs and retains a wide range of finishes it has excellent dimensional stability Pricing and Market: stumpage price about 2.5 times Douglas-fir. less demand correlation with new home construction and pulp/paper market 3
Coastal Redwood California Growing Range and History Coastal redwood is found naturally only in a narrow coastal band about 720 km(430 miles) long and eight to 60 km (five to 35 miles) wide. This coastal band extends from southern Oregon to just below San Francisco. In 1850 old growth redwood forests were more than 810,000 ha. Now about 30,000 ha remain, mainly in protected parks. 4
California Environmental and Harvest Restrictions Young growth (second or third generation) California redwood can be harvested, but is subject to a host of legislative acts and judicial rulings, with regulations arising from a number of different agencies. 5
California Redwood Production 1948-2006 Mainly because of environmental restrictions, the supply of redwood lumber has barely met the demand from the western states around which redwood is grown. Source: California Board of Equalization 6
m3 per ha 1,800 Estimated Total Stem Volume 1,600 1,400 1,200 1,000 800 600 400 Teak Douglas-fir Radiata Redwood 200 0 20 30 40 Age Notes: Teak harvest Year 20 Douglas-fir production thinned Age 35 Sources: Teak Douglas-fir Radiata- Redwood ISTF News Dec 2009 (Trinidad Plantation) Otago Unpruned thinned NZMAF table Central NI Unpruned thinned NZMAF table Simulation Estimate 7
Price per MBF Price Comparison of Redwood and Douglas-fir California Stumpage $1,600 $1,400 $1,200 $1,000 $800 $600 Douglas-fir Redwood $400 $200 $0 Year Source: California Board of Equalization Zone 1, Size Code 1 8
Mean annual increment m3/ha New Zealand Growth Rates International Softwood Growth Rates 30 25 20 15 10 5 0 New Zealand Chile Australia US South Pacific Northwest Spain Scandinavia Eastern Canada Russia Source: New Zealand Forest Industries Strategy Study (NZFIC, 1992) 9
Location, Location, Location California and NZ at equal latitudes north and south of equator 10
New Zealand for Forestry Investment New Zealand is an island country located in the southwest Pacific Ocean. Population is 4.3 million Ranks highly in international comparisons on: lack of corruption high educational attainment economic freedom legal system with property rights respected. World Class plantation forestry and infrastructure. 11
Tonnes New Zealand Emissions Trading Scheme (ETS) ETS is in place. Forest owners can receive carbon credits for the carbon stored in eligible forests. Owners can receive carbon credits as the carbon stock increases because of tree growth. Owners will be required to surrender credits if the carbon stock decreases (harvest, fire etc). 1,400 1,200 1,000 800 600 400 200 0 Estimated CO2 Sequestration 10 20 30 40 Years Douglas-fir Radiata Redwood Sources: D-fir and Radiata NZ MAF Look-up Tables Redwood Simulation Estimate
Meters Cubic Meters/ha How does the Growth of Redwood Compare between California and New Zealand? California Tree Height New Zealand 3,500 Log Volume 70 60 50 40 30 20 10 0 10 20 30 40 50 60 70 80 Years 3,000 2,500 2,000 1,500 1,000 500 Years 0 10 20 30 40 50 60 70 80 California 26 115 290 509 737 969 1,206 1,437 New Zealand 239 1,035 1,807 2,467 2,852 3,057 3,218 3,179 California: Empirical Yield Tables for Young Growth Redwoods Average height and log volume of sites tested > 10.5 DBH (University of California 1963) California redwood log volume at Year 10 is not available from the Tables used. We have provided an estimate for purposes of comparison. New Zealand: Taumaranui Permanent Sample Plot, King Country. Established 1922. Growth profile estimated. NZ Volume reduced 10% for stumps, tops 1 meter = 39.27 inches 1 MBF (log) = 4.53 m3 13
Redwood Developments in NZ 3 larger plantation efforts so far. About 4,000-5,000 ha planted in NZ. Earliest plantings were in 2004. Locations differ later sites concentrated in the North Island. Some plantings used exclusively clonal stock, some clonal stock + seedlings, some seedlings only. Estimate about 350-400 ha to be planted in 2012. 14
What SHIP has done Forest One Acquired: 2006 Total Land Area: Total Planted Area: 1,450 ha 940 ha 15
Video Clip New Zealand Redwood 16
SHIP Managed Plantations Forest Two Acquired: 2010 Total Land Area: 788 ha Total Planted (2011): 290 ha Total Planted (2012): 430 ha (est) 17
Pruning The purpose of pruning is to generate no-knot clearwood. In California, young growth redwood trees are not pruned, so no clearwood is produced from this timber. Only exceptionally harvested old growth redwood produces California clearwood. Because of its beauty and limited supply, clearwood commands a substantial premium to knotted timber. Pruned redwoods in New Zealand will produce large amounts of clear heartwood and sapwood. Pruned New Zealand redwood can re-introduce significant clearwood supply into the California market, and command premium prices. SHIP has just done the first commercial scale pruning in New Zealand of redwoods. 18
Significant Variables in Calculating an Estimated Return Land acquisition method Establishment costs Pruning costs Timing of timber harvest Timber yield and grade mix Timber pricing at harvest (Stumpage and/or Finished Lumber) Future markets Shipping costs Milling conversion rates and costs Does ETS continue for the life of the investment? Decisions on NZU sales and NZU prices at harvest 19
Important Investment Decisions in NZ Land acquisition Where Land type How much to pay Depending upon acquisition method, NZ governmental approval may be required. Resourse Concent process Establishment decisions and costs Planting stock to be used Follow-on management Pruning regime Harvest Decisions 20
Millions NZDs Sale of Redwood Generated NZUs 35 Estimated Cumulative Proceeds from all NZUs Received if Sold at Various Times/Prices 30 25 20 15 10 $15 $20 $25 5 0 10 20 30 40 Years Assumes 1,000 ha of eligible forest under ETS 21
Optimisation Future Markets Harvest Past Year 30 Branding 22
About SHIP SHIP has been established to scale-up the establishment and running of redwood plantations in New Zealand. SHIP would be the manager. Investors would access SHIP s assembled team of experienced forestry consultants, operational managers, legal, accounting and tax experts. SHIP has done extensive analysis on New Zealand redwood investment, including internal analysis and outside consulting reports on pricing, markets, valuations and expected returns. This allows interested parties to evaluate decisions without extensive new research. Interested parties can visit and see first-hand what can be accomplished in New Zealand large-scale commercial redwood plantations. 23
Summary Redwood as a Timber Investment: Superior return because of: rapid biological growth high timber value established market limited supply Redwood is being grown successfully in New Zealand. New Zealand grown redwood can be cash generative through the sale of carbon credits. If you want to establish a redwood forest in New Zealand, we are happy to assist. 24
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