NZ Council writes off $800k on failed timber mill

The Northland Regional Council is facing a loss of NZ$800k after investing in a timber mill at Marsden Point. The council lent the money to Resource Enterprises Limited, or REL, in 2014, from its investment funds.

REL ceased trading in 2017 and has not paid its last two quarterly interest payments. Council chief executive Malcolm Nicholson said the council had invested in REL in the hope of stimulating Northland’s economy after the Global Financial Crisis.

“The decision to invest was not made lightly; investigation and due diligence was done including advice from a reputable forestry consultancy.” Northland was still emerging from a recession at the time and the council had been keen to support initiatives to create employment and add value to Northland logs being sent overseas for processing, he said.

Another council source said REL was set up with state-of-the-art equipment that squared-off the logs, making them cheaper to transport, and the company had markets for both the slabs and flitches in Saudi Arabia and India. But as log prices soared, the company’s hopes of profits had faded.

“Local log prices rose about 40 percent from 2014, drastically reducing REL’s ability to secure the logs it needed at a competitive price,” Mr Nicholson said. The NZ$800k loss to the council was regrettable and disappointing, but would not hit Northland ratepayers directly in the pocket, he said.

Source: rnz.co.nz