25 April 2013

China Forestry Group New Zealand, a subsidiary of state-owned China Forest Group Corp, is keen to buy more local forests after buying several forest blocks from the New Zealand Superannuation Fund.

The New Zealand Superannuation Fund sold most of 11 North Island blocks to the corporation for an undisclosed sum, with the balance going to local investors. The Fund's timber assets, which accounted for 6% of the fund as at March 31,  still exceed $1 billion after the sale.

The Chinese company made the purchase subject to Chinese regulatory approval, after getting the thumbs up from New Zealand's Overseas Investment Office, the super fund said in a statement.

The North Island forest estates are the first step in the Chinese company's strategy to invest in the local industry and look at other opportunities, said the company in another statement. The general manager of China National Forests, Lin Zhan, expects the forestry investment will generate new jobs.

"China Forestry Group NZ will establish a permanent base in New Zealand in order to manage the newly acquired forest estate," Lin said.

"To ensure that the forests are managed to best practice, New Zealand based in-forest suppliers will continue to provide the in-forest services."

The Chinese company bought the majority of the portfolio, subject to Chinese regulatory approval, after getting the thumbs up from New Zealand's Overseas Investment Office, the super fund said in a statement. Part of that deal includes offering a scholarship to promote trade and business between New Zealand and China.

China Forestry Group NZ director Graeme Wong said it sees the acquisition as a long term investment to retain continuity of supply.

"Owning the forestry estate will not likely see any reduction in the purchase of export logs from other New Zealand suppliers," Wong said.

"Rather it should see the company sourcing more of its timber requirements from New Zealand."

The superannuation fund, known as the Cullen Fund for its architect former Finance Minister Michael Cullen, sought a buyer for the blocks last year, when it valued the estates at some $91.1 million as at June 30.

General manager of investments Matt Whineray said the sale would let the fund focus on other domestic and international investment opportunities.

"We see more attractive investment opportunities for our purposes elsewhere," Whineray said. "We are always working to ensure that we have the best possible mix of investments in the fund."

The Cullen Fund recently upped its stake in the Kaingaroa Forest, which is still the fund's single biggest asset worth $945.1 million as at March 31, and recently bought a $140 million stake in local IT company Datacom and 11 local dairy farms.

It's currently mulling whether to sell down its stake in service station chain Z Energy, which it co-owns with Infratil, with a potential listing in the third quarter. The fund valued its stake in Z at $523.9 million as at December 31.

Sources: NZ Herald and TV One News