Partnership between Forestry and Agriculture for Sustainable - PowerPoint PPT Presentation

Agadir, Morocco March 20 th – 24 th , 2017 Floresta Atlântica Fund in Portugal: “Partnership between Forestry and Agriculture for Sustainable Landscape Finance” Carla Dias Wadewitz BBI & Catolica Lisbon School of Business and Economics (carlawadewitz@gmail.com)

Demand for timber and timber assets  The timberland and forest management industry continues to grow as global demand rises and new uses for timber emerge 2

Demand for timber and timber assets World Timber Supply Forecast 2010 to 2020 (in million cubic meters) 2500 2000 1500 Supply 1000 Demand 500 0 2010 2020 Source: UN-FAQ 3

Market Trends  Timberland has shown a steady and overall high appreciation (low correlation with the economic cycles), representing the asset with the highest return since 1987 Source: International Woodland Company (IWC) 4

Market Trends  “ The inclusion of timberland in a portfolio greatly improves the efficient frontier as, for a given level of risk, the return is usually always higher ” Source: International Woodland Company (IWC) 5

Why investing in Forestry in Portugal? Market Conditions Successful Risk Country Investment Management Conditions Partnerships 6

Why investing in Forestry ry in Portugal? Country • High and easy accessibility (ports, airports) -> Easy to export Market • Industries (pellets, pulp & paper, cork, packaging) Risk Successful • Portuguese eucalyptus globulus provides higher industrial paper/pulp Country Management Investment productivity (+40%) than any other species • Available water resources and rain (in winter) Partnerships • Availability of land for acquisition and leasing • 14% of forestry land is managed by forestry communities • Land prices and labour costs are still relatively low Pulp & paper industry units • Portuguese State and the EU provide a support to investment (non refundable subsidies up to an average of 75% of the invested value) • Forestry activity enjoys significant tax benefits • Future exit for the investors is easy 7

Why investing in Forestry ry in Portugal? Market • High level of diversification of: (i) species and forest maturities; (ii) Market geographical location of assets; (iii) diversified product segments • High demand (big industrial clients) for wood products Risk Successful Country Management Investment • Increasing demand for raw materials • Easy to certificate Partnerships • Growth in co-combustion with biomass (cement companies, thermal power stations) • High prices and highest EBITDAs worldwide • Off-take agreements for the main products, at guaranteed price within a PBV of 15% relative to the highest market price 8

Portuguese Forest: Country ry & Market Conditions  Solid and high consumption forest industry (pulp, panel, cork and sawmill)  National high deficit (imports vs. exports) on roundwood, sawnwood, pulpwood, veneer logs and saw logs  Low exportation costs, due to high proximity to other large european consumers markets Forest products external trade (tonnes) Major forest industry units at Spain and Portugal Source: Ministerio de Industria, Turismo y Comercio. Estadísticas de Comercio Exterior (2002-2007) Source: Natural Assets 9

Portuguese Forest: Country ry & Market Conditions  Iberian businesses are represented the forestry industry internationally with some of the most prominent European companies in the sector. There are six Iberian companies among the Top 100 largest companies in the world, of which 29 are European. Major European players by country, 2012 22.1 ( Companies in the world top 100 ) 7 Revenue, 2009 (USD million) 35.4 5.0 4 4 12.7 6.6 3 3 4.3 5.5 2 9.4 2 2 2 0.5 1 1 Portugal France Germany Finland Austria Ireland Norway Spain UK Sweden 10 Source : PricewaterhouseCoopers

Portuguese Forest: Country ry & Market Conditions  More than 98% of the forest total area belongs to private owners (FAO, 2010), providing good acquisition opportunities.  Portugal’s forest land can be acquired at relatively low prices, when compared to other European countries. Forest area according ownership Source: Forest Resources Assessment 2010 (FAO, 2010) 3500 88,0% 3000 Thousand hectares 2500 2000 Public 1500 Private 1000 500 5,2% 5,1% 1,6% 0 Public ownership Private owned by Private owned by Private owned by individuals business entities local communities and institutions 11

Portuguese Forest: Country ry & Market Conditions Property acquisition costs • Transaction tax : Urban – 6.5%; Rural – 5.0% • Municipal tax – 0.8% • Total tax for acquisition of rural properties – 5,8% of the acquisition cost • Notary and registration – <21 € /hectare • Total cost per acquisition - <6,3% of the acquisition cost Company taxes Company income tax – 21.00% (2017) Timberland Funds based in Portugal • Full Exemption of income taxes • 10% over the dividends of Fund investors Forest Grants (CAP of 5M € /SPV) • Average: 50% of all installation, including infrastructures, excluding short rotation plantation; • Average: 30% of infrastructures costs for short rotation species (<20 years) 12

Floresta Atlântica Fund: In Investment • Floresta Atlântica Fund ( € 20 Million) was launched in October 2007 and it’s main purpose is to promote Mission sustainable forestry development through the commitment of private initiative. • Use forestry management mechanisms to achieve efficiency and profitability targets. • “Anchor properties” and “local nucleus” for risk management. Business • Promote partnerships, including public-private, as an innovative business model to foster sustainable forestry management. • Instituto de Financiamento da Agricultura e Pescas (40,5%); Shareholders 5 Private shareholders (59,5%). 13

Floresta Atlântica Fund: In Investment Land Use Cypress Cork oak 2% 3% Bush Walnut Other 3% 3% 1% Chestnut 3% Agricultural 5% Quercus Ilex 5% Oaks Maritime pine 6% 51% Eucalyptus and other hardwood 8% Other land uses 9% 14

Floresta Atlântica Fund: In Investment Policy Investment Policy - Diversification The production Tourism-based Forestry by Promoting Rental of and exploration entertainment products the areas for use of the forest , and activity useful for production to others, based on related to Nature forestry and which does replanting new Tourism, Cultural industries and exploration not come in stands and the Tourism in the biomass of all the conflict with management of rural setting, and combustion woodland forest and existing stands, open-air sports & industries resources forest with special activities growing/ava management emphasis placed ilable in all use (e.g. on some species the wind and properties solar parks) 15

Floresta Atlântica Fund: In Investment - more than 460 properties - GFS certification by FSC and PEFC systems - joining the WWF Global Forest & Trade Network - Certification of organic production - 23 tree species and 10 segments of wood products - 5 kinds of dry fruits (Chestnut, Walnut, Almond, Hazelnuts, Pine Nuts) - 6 bee products (mostly honey related) - 14 mushroom species - other products (carqueija flower, wild cherry, arbutus, blackberries) - Leases from Renewable energy players - Leases for fruits trees and aromatic herbs plantations - Leases from pastures - Leases from corn plantations 16

Why investing in Forestry ry in Portugal? Partnerships • Communities Market • Local authorities Risk Successful • Local and national forest organizations Country Management Investment • Scientific organizations • Local agents Partnerships • Certification agencies 17

Floresta Atlântica Fund: In Investment 18

Floresta Atlântica Fund: Partnerships Local Communities : • Jobs • Services suppliers • Fire fighting • Properties cleaning Local authorities : Local agents : • Land acquisition • Land acquisition Floresta Atlântica • Service suppliers and titles • Administrative • Fire fighting • Product sale paperwork Certification entities Scientific community • Research (species, (ex: GFS): • Certifications climate, IT systems) • Fire risk (individual, group, community) management 19

Floresta Atlântica Fund: Partnerships  Partnerships with all 60 forestry organisations  Transactions were made (purchases and leases) with 377 forest owners over 87% of which have properties area below the economically viable minimum size  Long-term lease contracts were made with 7 governing boards of wastelands and parish councils representing about 3,800 counterparts . These communities will receive by 2018 about € 1.7 million in rent and labor  Operating expenses 2008-2018 (forest management, operational managers, firemen, technical support) in the estimated amount of about € 20.7 million , mainly locally hired 20

Floresta Atlântica Fund: Partnerships 21