Exh¡b¡t "KCM-5" Email and Second Draft ProPosal

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
s ct 2013 2095
tN THE MATTER OF GUNNS PLANTATTONS LTMTTED (rN LIQUIDATIONXRECEIVERS &
MANAGERS APPOINTEDXACN 091 232 209) in its capacity as the responsible entity of
the managed investment schemes listed in Schedule I
DANIEL MATHEW BRYANT, IAN MENZIES CARSON and CRAIG DAVID CROSBIE (iN
their capacities as joint and several Liquidators of GUNNS PLANTATIONS LIMITED (lN
LTQUTDATTONXRECEIVERS & MANAGERS APPOINTEDXACN 091 232 2091
First Plaintiffs
and
cUNNS PLANTATTONS LtMTTED (tN LTQUIDATTONXRECEIVERS & MANAGERS
APPOINTEDXAGN 09f 232 2091 in its capacity as the responsible entity of the
managed investment schemes listed in Schedule 1
Second plaintiff
CERTIFICATE IDENTIFYING EXHIBIT
document:
of:
Date of
Filed on behalf
2 December 2014
the Plaintiffs
Prepared by:
ARNOLD BLOCH LE¡BLER
Lawyers and Advisers
Level 21
333 Collins Street
MELBOURNE 3OOO
Solicitor's Code: 54
DX 38455 Melbourne
Tel: 9229 9999
Fax: 9229 9900
Ref: 01-1782215
(Kimberley MacKay - [email protected],au)
This is the exhibit marked "KCM-5" now produced and shown to KIMBERLEY CHANTELLE
MACKAY at the time of swearing her affidavit on 2 December 2014'
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ABL/3928288v1
Exh¡b¡t "KCM-5"
Email and Second Draft ProPosal
JC
Lisa Conte
From:
Sent:
To:
Andrew Morton < and rew.morton @ i ndufor-a p.com
Monday,24 November2014 6:57 PM
>
Subject:
Kimberley MacKay; 'Louise Gray'
David Paul
Re: Gunns Plantations Limited (Receivers and Managers appointed) (in Liquidation)
Attachments:
GPL Project Allocation proposal-24 11 14 webversion.pdf
Cc:
(GPL)
Hi Kim and Louise,
Attached is the re-worded proposal which we consider would be suited for providing on the GPL website
You will note changes to descriptions of the methodology, costs and the timeframe
Could you confirm this suits your requirements?
Regards,
Andrew.
ffi
24 November 2014
Project number: 42807 577
Gunns Plantations Limited (in Liquidation) (Receivers and Managers Appointed)
c/o PPB Advisory
Level 21, 181 William Street
Victoria 3000
Louise Gray
Senior Manager
Attention
Dear Louise,
Subject:
Proposal
-
Allocation of sale proceeds for MIS p¡antat¡ons managed
by Gunns Limited (in
Liquidation) (Receivers
and
Managers
Appointed)
lntroduction
1
Gunns Plantations Limited (ln Liquidation) (Receivers and Managers Appointed) ("GPL") is the
responsible entity of the following managed investment schemes (GPL Projects):
.
.
.
.
.
.
.
Gunns Plantations Woodlot Project 2002 ARSN 099 584 675
Gunns Plantations Woodlot Project 2003 ARSN 104213710
Gunns Plantations Woodlot Project 2004 ARSN 108 690 080
Gunns Plantations Woodlot Project 2005 ARSN 1 13 092 854
Gunns Plantations Limited Woodlot Project 2006 ARSN 118 534 106
Gunns Plantations Limited Woodlot Project 2008 ARSN 128933237
Gunns Plantations Ltd Woodlot Project 2009 ARSN 135 490 292
On 24 April 2014 the GPL Project tree crops were sold, along with other Gunns Limited assets'
The price paid to the Liquidators for the GPL Project trees was $40,565'922.
The Liquidators have requested URS Australia Pty Ltd (URS) submit a proposal to assist with the
allocation of the proceeds across each of the GPL Projects noted above. The allocation is to be
assigned based on each investment Option contained within the GPL Projects noted above.
This proposal sets out our proposed approach and the timeframes to complete this assignment.
URS Austral¡a Pty Ltd (ABN 46 ooo 691 690)
Level 6, 1 Southbank Boulevard
Southbank VIC 3006
Australia
T: 61 3 8699 7500
F: 61 3 8699 7550
Louise Gray, Gunns Plantation Limited (in Liquidation)
24 Nôvember 2014
Page 2
2
Project allocation methodology
URS is familiar with the GPL estate having completed a desktop valuation of the tree crop assets in
February 2013. We propose to update this valuation, which covered the broader Gunns estate in
Tasmania, and use it as the basis for allocating the sale proceeds on a pro-rata basis across each
of the GPL Projects under consideration.
The previous valuation and this update will be completed according to the lnternational Financial
Reporting Standard 41 (IFRS 41) and the related Australian standards (Australian Accounting
Standards Board (AASB) 141 - Agriculture). The valuation will be completed by applying a market
based discount rate to nominal "pre-tax" cash flows arising from the current tree crop. The
valuation used for the allocation will not consider the effect of income taxes or the impacts
associated with different capital structures or debt f unding.
The purpose of the valuation is to determine the relative contribution each GPL Proiect
Option makes to the overall value.
2.1
Plantation area
For the previous valuation, URS completed a desktop audit of Gunns mapping system and
remapped a number of plantations using satellite imagery. We will apply the audit results to the
valuation,
URS is aware of a number of insect and fungal pathogens have impacted on hardwood plantations
across Tasmania, with some areas being severely affected. These areas were not apparent in the
aerial imagery used for the desktop area audit and were therefore not considered in our previous
analysis. This is relevant to the allocation of value because the potential removal of large plantation
areas that may be considered non-viable will have a material impact on the relative distribution of
value between GPL Projects.
ldeally, any affected Project area would be remapped using updated aerial imagery. However, this
is not practical for the purposes of this exercise. Therefore, URS proposes an aerial inspection of
the largest plantation aggregations to identify the extent of any damage and determine areas that
may be no longer viable. These areas would be excluded from the allocation area. An aerial
inspection provides a cost effective means of surveying large, dispersed plantation areas. The
inspections would be done by helicopter and completed over three days (one half to one day for
each of the main plantation regions
-
north east, north west and south east Tasmania).
The results from the aerial inspection would be used to update the area statement and inform a
more focused ground inspection.
A number of the GPL Projects contain more than one Option. Each Option contains plantations
managed on an alternative management regime. One Option includes plantations that are
supposed to be pruned and thinned for the production of sawlogs on a 20 year rotation. A ground
inspection is required to determine the status of these plantations as their current status will have a
bearing on the end products that could potentially be realised from these plantations.
The ground inspections are
also
necessary to confirm the viability of any damaged plantations
identified during the aerial inspection,
Louise Gray, Gunns Plantation Limited (in Liquidation)
24 November 2014
Page 3
2.2
Plantation yield
Plantation yield is an important value driver as it determines the quantum of revenue received from
the expected sale of wood products at maturity. lt also influences harvesting costs, which are highly
correlated to stand volume.
For the February 2013 desktop valuation, URS applied Gunns estimates of yield. Gunns yield
tables are based on a series of site quality curves (A (low productivity) to S (high productivity)).
Each forest management unit or Developed Area (DA) was assigned by Gunns a site quality curve.
Gunns procedures state that the assigned site quality should be updated following inventory at age
six and again at around age 10-12 years. However, Gunns has not maintained its inventory
programme and most of the yield estimates for the GPL Project plantations are based on the site
quality assessment assigned at the time of establishment.
ln this situation good forest practice would be to undertake a catch up inventory programme to
update the assigned site productivity to reflect the current condition of the plantation. However,
given the limited time available to complete this analysis, URS proposes to undertake a limited
sample to test the robustness of Gunns assigned yield, To determine the sampling intensity
required, URS reviewed the productivity variation in site quality curves assigned to each GPL
Project. ln the absence of any empirical data, this provides a reasonable indication as to the likely
variability in yield that can be expected.
This analysis indicates that a sampling programme of 210 plots is required in the hardwood
plantations to provide a robust comparison of yield within each GPL Project. Table 1 shows the
estimated number of plots required per GPL Project. This represents a very low sampling intensity
and is considered the minimum number required to provide a robust comparison with Gunns yield
estimates,
Table
1
Proposed inventory sampling programme
Net planted
area (ha)
Pro rata
No. plots
vol/ha
weiqhtíno
required
GPL_2002
264
10,777
21%
40
GPL_2003
169
6,500
13%
25
15
Av, current
GPL Proiect
GPL_2004
139
3,426
ao/
GPL_2005
103
8,690
17%
30
GPL_2006
BO
14,129
28%
50
GPI _2008
47
6,005
120k
30
GPL
3B
1.744
3%
20
100%
210
Total
2OO9
139
51
Plots would be located randomly across each GPL Project. The assignment of plots would be
weighted by volume so the larger plantations (that provide a greater contribut¡on to value) would
contain more plots. The inventory design will be finalised once the area statement has been
updated.
Given the dispersed nature of the plantations and the randomised location of the plots (which often
results in a single plot per plantation), we anticipate the programme would take three inventory
crews approximately three weeks to complete, Additional sampling may be required should the
desired level of precision not be achieved.
Louise Gray, Gunns Plantation Limited (in Liquidation)
24 November 2014
Page 4
The inventory results would be used to update the assigned site productivity and subsequent wood
flows for each GPL Project. URS would accept Gunns plantation growth assumptions and apply
them in their current form.
For the Tasmanian softwood plantations in the GPL Projects that contain Option 3 plantations,
URS propose to inspect a sample of these plantations and assign an expected yield based on our
field observations.
2.3
Costs and markets
URS will review the cost and hardwood woodchip market assumptions used for the previous
valuation and update to reflect market conditions as aI24 April 2014.
Option 2 - Hardwood sawlog: URS will consider the limited data available to assess the market
price for pruned and unpruned hardwood sawlogs as part of the assessment of Option 2 subProject. No in-depth analysis of these markets will be presented in our report.
Option 3 - Softwood markets: Softwood log pricing will be based on publicly available stumpage
price information for the Australian softwood industry,
2.4
Land
Allthe GPL Project plantations are established on leasehold land.
URS will rely on GPL to provide lease cost details including data such as the lease payment
schedule, lease end dates, lease costs that are assumed to apply beyond the existing lease end
date (if required to be enacted given potential to constraints selling product), and in respect to any
requirements of the tenant in respect to their obligations (i.e. cost of make good) post the
harvesting and sale of the tree crop related to exiting the lease arrangement.
A review of the lease terms and conditions is beyond the scope of our analysis.
2.5
Wood flow modelling
URS will use the Woodstock forest estate modelling software to update the valuation. The model
will be modified to take Into account revisions made to the various inputs.
The model outputs will be presented as the percentage contribution made by each GPL Project
Option.
A number of properties may have a negative value. The treatment of plantations with negative
values will potentially have a significant effect on the allocation of value. To show the impact, the
outputs will consider the inclusion (i.e. reduce the overall value) and exclusion (i.e. assume a zeto
value) of plantations with a negative value.
2.6
Project budget and timeframes
Given the uncertainty associated with the outcomes from the area and yield review, we propose to
complete this task on a time and materials basis. Table 2 provides a broad work plan for this
project.
Louise Gray, Gunns Plantation Limited (in Liquidation)
24 November 2014
Page 5
Table
2
Estimated projecl timeframes
Allæstlon of GPL Prolect value
lndlcatlve work plan
Veßion:
1
2 Novembet 201 4
Tûsk outllre
Theme
1
2
3
4
5
6
7
I
I
10 11 12
13
Resourcs doscrlptlon Confrrm propellies to be included ln allocalion
lJpdate dalabase lo rellecl Projecl area - confiÌm miss¡ng dala
Inspeclions (PIeParation)
Aerìal ¡nspeclion (1 day/region)
GIound inspectlon (1 daYfegion)
Compile dala and prepare inspection reporl {incl Opl¡on 1, 2 & 3)
Area adjuslmenls based on ¡nspectÌon resulls
lnwntory plann¡ng
Generation of inwnlory m aps/coordinales
Logislics/ owrs ight over inrenlory crews
Undertake lield invenlory
Process ing of ¡nventory data
Anal'€ ¡s of ¡nwnlory res u lls/ updale yìe ld es
l¡m
ales
Eluation assumpl¡ons
Costs
Review and updale
Markets
Review and updale Elual¡on assumplions
Valuallon mod€¡
Updale model lo reflecl Projecl area
Incorporale new area and yield dala
lncorpo.ale olher cost and markel lnpuls
Dewlop base case Eluallon
Ardil and eror checking
Sensilivity analysis
Dlscount rate
Rg\¡ew markel lrends ìn discounl rates
Reportlng
Dratt valualion reporl
Revìew ol Opl¡on 1/2/3 diflerences
Presentalion/anal)sis of resulls
Revised drafl
Final reporl
Prolêcl ñâñâdêment
3
Contracting arrangements
URS has an existing contract in place with GPL. We propose this work be completed as a variation
to the existing agreement.
This proposal remains subject to internal URS approvals.
Thank you again for the opportunity to present this proposal and I trust it meets your requirements.
Please contact myself or Harry Grynberg (Senior Principal Consultant for URS) should you want to
discuss any aspect of our proposal.
Yours sincerely on behalf of
URS Australia Pty Ltd
o,47t*u
David Paul
Head of Forest Resources Consulting, lndufor Asia Pacific Australia Pty Ltd
As sub consultant to URS Australia Pty Ltd

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