AT LAST year’s AGM, Gunns’ pulp mill supremo Les Baker denied vehemently that the company was the beneficiary of any government subsidies.  With a straight face, Les told an unconvinced audience that rather than costing the taxpayer money, Gunns actually made a positive contribution to the State’s finances by building roads, and presumably other public-minded efforts like reducing roadkill by eliminating pests with 1080 before they stray onto highways.

Getting the pulp mill off the ground is a big undertaking, so it’s understandable that Les isn’t fully up to speed with the subsidy issue. 

He may have overlooked the fact Gunns’ MIS business would be unviable in the absence of taxpayer-sponsored support, and that timber from Tasmania’s native forests is sold to Gunns at a loss by Forestry Tasmania.

Les also didn’t point out that, at the time of the AGM, Gunns was the majority owner of a couple of Scottsdale sawmills that have the dubious distinction of being Tasmania’s most heavily subsidised businesses.

Auspine, a South Australian company with a reputation for enthusiastically promoting its own self-interest had been partially acquired by Gunns earlier in the year, with the remaining shares being mopped up in early 2008.

In addition to some land and pine plantations in Victoria and South Australia, Gunns became the owner of the two Tasmanian mills that, by Auspine’s own admission, were basket cases.

A couple of years ago, Auspine added to its Tasmanian holdings by paying $35 million for the Frenchpine operation near Scottsdale, making the combined enterprise the largest player in Tasmania’s radiata pine industry.  But after a bungled attempt to secure a long-term wood supply deal, early last year Auspine wrote down the value of the two mills to just over $10 million, little more than the salvage value of the machinery.

When Gunns took over, not only did they inherit the two sawmills, but they also picked up some ongoing government support to help access pine cheaply.  Like $4 million from the Scottsdale Industry and Community Development Fund, along with some cash under the Tasmanian Community Forest Agreement.

But wait, there’s more.  The State government is providing $6 million by way of free access to pine from the West Coast and King Islands.  There’s also $4 million to help build a road in the North East (ostensibly to help tourists get to a Gold Coast style resort to be built on a swamp near Gladstone.)  When that fanciful project falls over, don’t be surprised to see the road funding reallocated to something more useful to the forestry industry.

$15 million in support for an operation worth $10 million sounds extreme, but it’s consistent with the State Government’s tried and tested philosophy of throwing good money at businesses that can’t compete without taxpayer support (strangely, they all seem to be forestry related.)

Gunns’ maintain their pulp mill won’t use old-growth timber (Tasmania’s ancient forests will instead be chipped and exported from Triabunna), but they do admit it can process around 400,000 tonnes of pine each year.  It’s comforting then to know that Gunns has access to substantial quantities of free, or at least heavily subsidised radiata pine.

They may soon have more pine still.  Gunns inherited something else from Auspine – an ongoing legal bid to overturn Taswood Growers’ decision to allocate 290,000 tonnes of pine each year to FEA.  Court proceedings begin in a few weeks, and if successful, Gunns will have access to all the pine they could ever need.

If the legal bid fails, Gunns has another option - Forestry chief Bob Gordon admitted last year that the government’s 50% stake in Taswood Growers’s pine plantations could be sold.  In an open market, up to $50 million could be achieved, and Gunns is the obvious bidder.

Just don’t expect them to pay full price.

Jarvis Cocker
Hobart

Jarvis Cocker

When Gunns took over, not only did they inherit the two sawmills, but they also picked up some ongoing government support to help access pine cheaply.  Like $4 million from the Scottsdale Industry and Community Development Fund, along with some cash under the Tasmanian Community Forest Agreement. 

But wait, there’s more.  The State government is providing $6 million by way of free access to pine from the West Coast and King Islands.  There’s also $4 million to help build a road in the North East (ostensibly to help tourists get to a Gold Coast style resort to be built on a swamp near Gladstone.) When that fanciful project falls over, don’t be surprised to see the road funding reallocated to something more useful to the forestry industry.