Papermaker sells its Tasmanian forests

PAPERMAKER Norske Skog has announced the sale of its Tasmanian forests for $62.5 million. Included in the sale are forests in the Derwent Valley and Central Highlands and smaller stands in the Huon Valley, Tasman Peninsula and Southern Midlands.

The company says the sale is accompanied by a long-term wood-supply agreement to provide pulpwood to the Boyer Mill at New Norfolk.

The buyer has been named as Australian-based investment manager New Forests Pty Ltd. “The sale of the Tasmanian forest is a continuation of Norske Skog’s strategic asset review and is in line with Norske Skog´s communicated strategy of optimising its portfolio and seek value enhancing transactions," Norske Skog president and chief executive Sven Ombudstvedt said.

"The sale is part of the group's long-term strategy where released funds will enable the necessary conversions, investments in new green projects and investor policy to be fulfilled," he said. "I am satisfied that we also have assured a long-term softwood supply agreement for the Boyer mill.”

The company said the sale was subject to conditions including approval from Australian's Foreign Investment Review Board and is expected to take place in the end of the second quarter of 2020.  "The sale and the cash proceeds from the transaction will further strengthen the group’s underlying balance sheet and financial capabilities, and thereby provide increased robustness for future investments in the group and attractive dividends in the years to come,"  Mr Ombudstvedt said.

Norske Skog's Boyer Mill at New Norfolk.

Norske Skog Boyer has an annual newsprint production capacity of 150,000 tonnes, and magazine paper production of 135,000 tonnes. The plantations included in the sale have traditionally supplied around two-thirds of Boyer’s annual pulpwood consumption of approximately 550,000 tonnes.

Boyer will enter into a long-term pulpwood supply agreement with the buyer for supply of 360,000 tonnes annually, which will start from the completion of the transaction. At the same time the existing contracts related to the plantations - such as forest harvesting and transport services - will be transferred to the buyer.

The company says paper production will continue at Boyer. "Norske Skog’s long-term strategy remains to improve the group’s core business, to convert certain of the group’s paper machines and continue to to diversify the business into bioenergy, biochemicals and alternative fibre markets," Mr Ombudstvedt said.

Norske Skog operates six mills in five countries, with an annual production capacity of 2.3 million tonnes. Its newsprint and magazine paper is sold through sales offices and agents to more than 80 countries. The group has about 2300 employees. As well as the traditional publication paper business, Norske Skog has launched new initiatives related to renewable energy, biochemical products and fibre products.

The Boyer mill has been producing newsprint for Australia's newspaper publishers since 1941. A sister mill opened in Albury, NSW, in 1981 and closed last year. Boyer has long been involved in various diversification projects from the production of timber veneer and the switch from old-growth hardwood to plantation-grown softwood, to the more recent conversion of one of its machines to produce lightweight coated paper, and the production of a non-toxic solvent.

New Forests is described as an Australian-based international sustainable forestry investment manager, with interests in around 550,000 hectares of forests and timberlands across a global portfolio of nearly 1 million hectares of forestry and conservation investments. New Forests has offices and assets in Australia, New Zealand, Southeast Asia and the US.