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David Brand NRF

David Brand NRF

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David brandtalksabouthancocknaturalresourcegroup David brandtalksabouthancocknaturalresourcegroup Presentation Transcript

  • Hancock Natural Resource Group (Australia)
    Institutional Investment in Forests in Australia
    David G. Brand, Ph.D.
    Director, New Forests Program
    Hancock Natural Resource Group
    Level 19, 821 Pacific Hwy
    Chatswood 2067
    (02) 9884-8202(tel) (02) 9411-1315 (fax)
    dbrand@hnrg.com.au
    6 May 2004
  • 2
    Important Note
    The material in this presentation is provided for information purposes only. While the information comes from sources believed to be reliable, Hancock Natural Resource Group (Australia) does not warrant the accuracy or completeness of the information provided.
    Any projections, forecasts or forward looking statements in this presentation are a function of many assumptions and may in fact be wrong.
    This presentation is not an offer of investment advice or an offer to sell securities
  • Hancock Natural Resource Group (Australia)
    Australian arm of HNRG Inc., a subsidiary of Toronto-based Manulife Financial Services (NYSE/TSE:MFC). HNRG is part of the Global Investment Management Group, which manages approx. $200 billion for both in-house and third party clients
    HNRG currently manages $US 3 billion in assets on behalf of over 50 institutional clients (1.2 million ha of forest in USA, Australia and Canada)
    HNRGA established in 1998 with acquisition of Hancock Victorian Plantations (HVP) from Victorian Gov’t. Further acquisition of plantations from Paperlinx in 2000.
    HNRGA awarded first Forest Stewardship Council Certification for HVP in February 2004
    HNRGA received AFSL licence in March 2004
    Our business model is to provide excellent risk adjusted returns from the forestry asset class to our institutional investor base
  • The New Forests Program
    Established in 2001, based in Sydney
    Aim is to extend the forestry investment model to encompass emerging opportunities to commercialise environmental services and support reforestation-based investment
    Need to establish a ‘made in Australia’ business model for investment in the forestry sector
    Tax system and government policies are oriented to support expansion of plantation forestry base
    Limited deal flow in mature plantation estates (only 3 or 4 government assets) that are analogous to US Timberland Investment Model
    Critical national issues of climate change, dryland salinity and biodiversity loss need systematic commercial solutions—forests can contribute to these issues
    We are beginning to find investment structures that can support growth in institutional forestry investment in Australia
  • Many regions have wood supply deficits…
    Projected supply deficit for Murray Valley
    Region to 2019 if all planned mill expansions proceed
    Source: URS Forestry
  • Chinese Timber Imports are expanding rapidly, exhausting SE Asia and the Russian Far East…
    Source: Xiufang Sun, Forest Trends
  • Add to this the need for reforestation…
  • Land clearing is leading to a substantial
    decline in water quality in Australia….
  • Need for commercial solutions
    Major environmental issues are a result of the failure to ‘price’ environmental externalities
    Forests provide key environmental benefits
    Absorption of carbon dioxide
    Regulation of hydrological cycle to reduce spread of salinity
    Biodiversity conservation and enhancement
    These markets are emerging steadily, as the public, governments and business understand the costs associated with business as usual
    But can this be profitable…..?
  • Carbon Markets are expanding…
    • Carbon markets are emerging in Europe, Japan, Canada, USA, even NSW
    • Growing moves by business, including voluntary measures, pre-compliance,
    and retail carbon trade
    Global Carbon Trade
    To 2003
    Source: Natsource LLC, The World Bank
  • And market prices are firming…
    NGAC Pricing ($AUD/tonne CO2e)
    Approximately 1,000,000 tonnes of NGACs have now been transacted
    Source: NextGeneration Energy 2004
  • Capitalizing on environmental externalities in forestry investment
    Figures in AUD$ (Assume NPV based on 9% real discount rate, hypothetical case)
    Land
    leasing
    Originalinvestment
    Renewable
    energy
    Carbon
    Credits
    Timber
    & Pulp
    Water credits
    / salinity
    Potential
    net gain
    X
    100
    X
    80
    X
    60
    50
    40
    20
    60
    -60
    0
    -20
    --40
    Source: Swiss Re
    --60
  • Generalized investment Model
    Land Leases
    Wind Rights,
    Bio-energy
    Forestry Co
    Investor Equity
    Carbon Buyer
    Debt
    Water Quality
    buyer
    Forest Product
    Buyers
  • Investment Opportunities
    Everything we do is private equity and all our investments are targeted to qualified wholesale investors
    These investments, like all forestry investment, should be considered relatively illiquid
    We have a range investment structures to serve investor needs:
    Separate Accounts
    These New Forests Investments are limited, but there is room for more investors
    Another approach is an investment that combines both traditional timberland with a portion of New Forests investments
    We can establish portfolio’s within Australia or internationally diversified
    Commingled funds
    HNRGA is acting as asset manager for ASIF
    Other possibilities may emerge
  • Summary
    The New Forests Program represents a new class of Forestry Investment—designed to reflect the investment environment and specific opportunities of Australia
    This is an emerging sector, but likely to see substantial growth in coming years.
    Returns will be competitive with traditional timberland and infrastructure area, but with unique linkages to areas of sustainability, new markets and sectoral rationalisation