Fletcher Forests to face fresh court wrangle

By LIBBY MIDDLEBROOK

Fletcher Challenge Forests will face another High Court battle over its turbulent forestry partnership with Chinese Government-owned company Citic, despite the two companies holding a high-level management meeting in Beijing earlier this week to try to resolve the dispute.

Citic New Zealand's general manager of operations, Greg Molloy, said the company had told its lawyers to proceed with court action over the Central North Island Forestry Partnership, a 165,000ha plantation jointly owned by Citic and Fletcher Forests.

Citic, a wholly owned subsidiary of Beijing-based China International Trust & Investment Corp, is unhappy with the way Fletcher has been managing the joint venture and has already been in court this month to stop Fletcher selling the plantation's logs to itself with the partnership board's permission.

While Fletcher Challenge's chief executive, Michael Andrews, had flown to Beijing this week to negotiate with the Citic chairman, Wang Jun, Mr Molloy said the company still planned to seek a substantive hearing in the High Court to remove Fletcher as partnership manager. Negotiations had been "bubbling away" for years without result, he said.

"That's what's forced Citic to take court action. The only way we will move to arbitration is if Fletcher agrees to provide certain interim undertakings, such as log allocation and pricing issues."

Mr Molloy said the only move forward resulting from the Beijing-based meeting was a promise by Fletcher to submit a number of proposals during the next three weeks aimed at "moving the issue forward." He declined to comment on the nature of the proposals.

Fletcher Forests' investor relations manager, Mark Harris, yesterday declined to comment.

Citic estimates it is losing between $25 million and $30 million a year because of the dispute.

The interim injunction sought by Citic earlier this month to stop Fletcher selling the partnership's logs to itself was dismissed by Justice Potter in the High Court, because it would be "counter-productive."

Fletcher Challenge - which jointly purchased the plantation with Citic and Brierley Investments in 1996 for $1.6 billion, net of debt - is keen to avoid court action and settle the wrangle through arbitration.

The companies' North Island forestry plantation was formerly owned by the Government's Forestry Corporation. Brierley sold out in 1998, leading to Citic and Fletcher pumping a further $US126 million into the venture.