Government bails out Maori forest venture again

The Government is to lend $3.6 million to a Maori forestry company banks refuse to touch.

Taitokerau Forests Ltd (TFL) already owes the Government $50 million and Treasury has advised that it is best to continue pouring money into the venture or risk losing the lot.

The forestry management company was established in 1986 to develop pine plantations in Northland, with the Government agreeing to fund $2 million a year for 20 years through the then Board of Maori Affairs.

In 1992 a different government tried to get out of the deal and in the end renegotiated a commercial loan agreement in 1996.

TFL was told then that it would get no more from the Government and would have to raise any more money privately, but buried in documentation associated with this year's Budget are details of requests for a loan from the taxpayer.

"In 2002, TFL applied to the Bank of New Zealand, Westpac and Rabobank for financing. All three lenders declined to provide funding for TFL, citing the length of time till harvest as the reason," Treasury advised Finance Minister Michael Cullen in a January 2004 briefing paper.

"Harvesting is planned for 2009-2018. Unable to secure private financing, TFL has approached the Crown seeking a further credit line."

Treasury said advances plus interest owed totalled around $50 million and TFL wanted another $3.6 million loan to manage their 4345ha of radiata pine plantations until 2007/2008.

"While the Crown is no longer under any legal obligation to continue funding TFL, failure to provide the company with further funds could see TFL become insolvent. This poses a serious risk to the Crown's advances provided so far," Treasury said.

"Without additional financing, TFL would be unable to maintain or manage its forests. If this were to occur, harvest revenues would be significantly reduced or even non-existent, and the Crown would have little, if any, hope of recovering its advances."

Treasury said it was a risky investment and it was possible the Government might never be repaid.

It also flagged a risk that TFL might come back for more money to maintain its 14 different plantation blocks of varying quality and size if it was rejected by commercial lenders again.

Treasury said to minimise the risk the loan should be spread over four financial years to 2007/2008.

By this time TFL would have had the forests valued and might be able to take on debt from the private sector "before approaching the Crown".

Dr Cullen's spokeswoman said the loan had been approved and was due to be drawn down in mid-August.

Ministry of Agriculture and Forestry briefing papers said TFL was a Maori-owned and controlled company established to develop Maori-owned land in Northland.

"In its first five years, TFL established around 4800ha on Maori-owned land. In 1991 the Government decided to end its funding of TFL. This left the company unable to complete its silviculture programme on existing forests," MAF said.

"In 1996 the Government agreed to lend a further $11 million to TFL, to enable the existing forests to be managed through to harvest. Because the Government's funding was capped, TFL has been unable to complete its long-term plan, which envisaged the forest area increasing to 10,000ha."

- NZPA