MyFarm general manager of investments Con Williams says there had been more investor interest since the start of the year as the price of carbon increased.
MyFarm has raised $13 million from wholesale investors for the purchase and planting of 1200ha to 1300ha medium to hard hill country under the heading CQuest Carbon and Forestation Fund.
With bank loans, the total funds available will be close to $20m, MyFarm general manager of investments Con Williams said.
Two properties have been secured for Pinus radiata planting this year, about 356ha on Puketawa Station, near Tiraumea in Wairarapa and 300ha on a Central Hawke’s Bay property.
“We still have some capital to deploy, but availability of tree seedlings and planting crews will delay that development until next year at the earliest,” Williams said.
Stage 3 of the first CQuest fundraising closed on March 1 and Williams said there had been more investor interest since the start of the year as the price of carbon increased.
Underpinning those prices was New Zealand’s commitment to reduce carbon emissions by 2030 and 2050.
He thought there was scope for a further one million hectares to be planted in trees at the rate of 100,000ha/year, limited by seedlings and planters.
NZ already has about 1.75m ha of plantation forests.
He compared that scope with the existing area of land under pastoral farming, between nine million and 10m ha.
Valuations of land, timber and carbon would sustain purchase and establishment costs of $30/t ($15,000/ha) and with the carbon market currently around $75/t there was a healthy margin to be obtained.
A one-hectare block of pine trees sequesters, on average, 30t of carbon a year and MyFarm have assumed total sequestration of 480t/ha.
The CQuest information memorandum forecast income of 10-13% annually from carbon credit sales in years five to 17 and an internal rate of return (IRR) of 6-9% over its lifetime.
That was calculated on a carbon price between $50 and $60/t.
At the present market price of carbon, the IRR rises to 11-12%.
Additional returns would come from harvesting trees at maturity.
Land planted in trees had three or four potential return streams: carbon credits, cutting rights, timber harvesting and land sales.
CQuest $1 units will also be listed on the Syndex secondary market for investors who wish to buy and sell.
Williams said CQuest 1 was closed for now and given the time lag in farm purchasing and tree planting, he couldn’t say when a CQuest 2 offer might be put together.
