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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - October 2010 Decisions

Aussies Buy Buller Coal Project

A slightly quieter month at the OIO, but includes a couple of significant change of overseas ownership decisions. Firstly, Bathurst Resources Limited (as at 14 September 2010) Australian Public (67%) Regent Pacific Group Limited, Hong Kong (Special Administrative Region) (20%) Hamish L Bohannan, Australia (2.5%) United Kingdom Investors, United Kingdom (except Isle of Man and the Channel Islands) (2.2%) Gary E Weston, Australia (2.2%) Wardman Family Holdings, Australia (2.2%) Macquarie Investment Management Limited, Australia (2.2%) Hong Kong Public (1%), various overseas persons (0.7%) received approval for the acquisition of rights or interests in 100% of the shares of L&M Coal Limited, the consideration of which exceeds $100m. The vendors were existing shareholders of L&M Coal Holdings Limited New Zealand Public (33.4%), Tangent International Limited, Switzerland (33.3%) and Campania Holding Inc, Hong Kong (Special Administrative Region) (33.3%). Consideration was stated as $165,390,000 (plus certain ongoing royalty consideration). The OIO states: "The Applicant will acquire a coal project in the Buller region, which is ready to progress to coal mining and production stages through a number of coal exploration permits. The Applicant aims through the Investment to become a mid-tier coking coal producer. The Applicant plans to eventually have premises in both Christchurch and Westport and will need to employ, directly and indirectly, around 400 local mine staff".

The National Business Review (NBR), 1/2/11, commented on this deal and subsequent delays under the heading "Bathurst Resources pushes on". "Bathurst Resources says it is moving ahead with efforts to gain resource consents for its plans to mine at the Buller Coalfield on the West Coast, after delays following the Pike River coal mine disaster. Perth-based Bathurst Resources completed the purchase of the Buller coal project from L&M Coal Holdings during the December quarter. The total acquisition cost was $US40 million (NZ$51.7 million), with two further performance costs of $US40 million each when the project moves into production.

"In its activities report for the December quarter, Bathurst Resources said its focus for the period had been completing a definitive feasibility study for the Escarpment and Deep Creek blocks at the Buller project. The study estimated the capital cost of the Buller project to be about $US50m. Bathurst Resources is aiming to produce premium hard coking coal from the Buller project in the December quarter of 2011, with production reaching two million tonnes per annum by late 2013. The company said that in the March quarter, regulatory approvals and consents for the development of the Buller project, as well as the establishment of key contracts for the construction of a coal preparation plant and related facilities, were its key focus. The start of operations at the Buller project was conditional on receiving resource consents and access and concession permits from the Department of Conservation. Progress on the applications had been delayed in the wake of the tragedy at Pike River, Bathurst Resources said. 'In early 2011 however, Bathurst resumed discussions with the local communities and regulatory bodies to progress these applications for the Buller project', the company said...."

In June 2011, Bathurst signed an agreement with State-owned Solid Energy to share transport and infrastructure in developing their neighbouring coal mines on the Denniston Plateau near Westport. At the time of writing, Bathurst was applying for resource consents to mine 200 hectares of public conservation land at Denniston and to construct a coal dewatering plant. The Department of Conservation was conspicuous by its absence at the resource consent hearing, suggesting the Government was no longer funding DOC's advocacy role.

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Mangakahia Forest Ownership Changes Hands Again

Sino-Forest Corporation Canada Public (30%), United States Public (20.9%), Paulson & Co, United States of America (16.3%), Various overseas persons (13.2%), Davis Advisors, United States of America (12.8%), Singapore Government, Singapore (6.8%) received approval for the acquisition of rights or interests in 100% of the issued share capital of GFP Mangakahia Forest Venture Limited which owns or controls a freehold interest in 12,586.8810 hectares of land near Dargaville. The vendors were GTI 6 Mangakahia Holding Co Limited United States Public (40%), Saudi Arabian Public (23.5%), Danish Public (21%), Australian Public (6%), Swiss Public (5%), and various overseas persons (4.5%).Consideration was stated as confidential.

The OIO states: "The Applicant is a commercial forest plantation operator that is listed on the Toronto Stock Exchange. The Applicant has significant forestry interests in the People's Republic of China. The Applicant will purchase the shares in a group of companies which own Mangakahia Forest Estate (the Forest Estate), a pinus radiata forest near Dargaville. The investment will enable the Applicant to sell timber from the Forest Estate into markets in which the Applicant already has a significant presence".

According to Wikipedia: "Sino-Forest Corporation is one of the leading commercial forest plantation operators in the People's Republic of China. Formed in 1994, its principal businesses include the ownership and management of tree plantations and complementary manufacturing of downstream engineered-wood products. The company derives most of its revenue from the sales of wood fibre needed to produce industrial, commercial and residential wood products.

"Sino-Forest also holds a majority interest in Omnicorp Limited, an investment holding company listed in Hong Kong) that imports wood fibre into China. Sino-Forest's common shares have traded on the Toronto Stock Exchange under the symbol TRE since 1995 and its corporate office is in Mississauga, Canada. Sino-Forest had a market capitalisation of just over $5 billion in November 2010. As of September 30, 2009, Sino-Forest had approximately 757,000 hectares of trees under management and over 700,000 hectares of trees available to be acquired under its six long-term master agreements. The company intends to replant 200,000 hectares by 2012". See our commentaries for December 1995, January 1996, and March 2002 for details of other transactions involving this forest. Also see our September 2009 commentary describing how the current ownership structure of this forest (prior to the above transaction) came into existence.

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Danes Plan To Build Milk Powder Plant In Arapuni, But...

It seems interest in our dairy industry is indeed global. Arapuni Milk Limited Danish Public (58.3%), New Zealand Public (26.7%), Dutch Public (15%) has received approval to acquire a freehold interest in 14.7 hectares of land at Arapuni Road, Arapuni, South Waikato. The vendor was South Waikato Processing Facility Limited New Zealand (100%); consideration stated was $860,625. The OIO states: "The Applicant proposes to acquire the land and construct a milk powder processing plant on the periphery of Arapuni, a high milk growth area situated in the South Waikato District. The Applicant has identified significant key elements driving the emergence of independent dairy companies in New Zealand that in its opinion provide an opportunity to achieve a return on investment which fits with its skills and risk profile".

Despite the above approval as well as resource consents being granted by Environment Waikato and the South Waikato District Council, eight days later four out of the five Arapuni Milk directors resigned, and the overseas investors pulled out. Details of the setbacks enveloping this project were reported by Richard Rennie in the New Zealand Farmers Weekly 8/11/10. "Arapuni Milk aims to build a 37,000 tonne per annum plant near the small South Waikato town and had originally planned to start processing milk next spring. Funding had included significant overseas investment from European-based investors for the $100 million plus required to process and market high value baby food products to European markets.

"However, the same month its resource consents were granted by South Waikato District Council (SWDC) and Environment Waikato (EW), the company has had its three major foreign backers and board members step down, along with Chairman and Waikato dairy industry veteran Barry McLaggan. The departure of the overseas-based investors leaves Waikato businessmen and project founders Rob Gifford, Jon Courtney and Richard Stapel seeking other sources of investment to keep the project alive. 'At the end of the day they could not come up with the equity required of them so the shareholders agreement was dissolved', Gifford said.

"He confirmed the Danish connections in the project had originally intended to arrange the installation of Danish powder drying equipment that was to be partially funded through Danish export incentives. The company had been granted Overseas Investment Office (OIO) consent to invest in the project. 'They did not quite get it over the line for approval in Denmark though'.

Gifford said the three original partners through their company Zoagn aimed to keep a 25% shareholding, and sell down around 75%. This was the equivalent to at least $50 million of equity in the high value processing plant. Gifford was confident the group would have replacement investors sorted within the next month. He suspected they would also be overseas investors and would require OIO approval.

"On a local level however, the group now also faces delays due to local Maori opposition, with an appeal lodged against the SWDC decision. Spokesman for the Ngati Koroki Charitable Trust, Steven Wilson, said the group did not oppose development in the area per se. 'We are dairy farmers ourselves. However, the change in personnel at board level is of concern to us, we will have to start conversations again - this company would be a significant player and we need to trust that the landscape and environment are going to be protected'.

A major concern for the group was certainty of funding for the project now the previous investors had exited. 'We do not want to be the ones left looking at the remnants of a partially constructed plant that could not be completed due to failure of financing'. Wilson said settling out of the Environment Court would be a preferable option if the group's concerns could be met. South Waikato District Council planning manager Alan Moss said the appeal had passed to the Environment Court, and he expected it could take at least six months to be heard before a judge. 'Effectively this means the consent is in abeyance until it is resolved, either by meditation or by the Environment Court'. The SWDC will effectively have to defend its decision to grant the consent before the court after granting land use consent to operate the factory.

"By late last week EW had not received any appeals to its consents granted. Consents Manager Barry Campbell said EW regarded the application as a good project with sound environmental management technology around waste management. The plant did not intend to make use of the raw milk provisions in the Dairy Industry Restructuring Act to source up to 50 million litres a year. Rob Gifford said because Arapuni was aiming at the top end of the European formula market, full traceability was essential for customer companies, and he claimed this could not be guaranteed with DIRA supply.

"This leaves the company also needing to secure around 50,000 cows to supply the 220 million litres a year the plant requires. With the Miraka Milk plant being commissioned next spring 110km south, competition for supply would appear to be heating up in the South Waikato region. 'We are only seeking supply from around a 50km radius, Miraka is 100km down the road. We are extremely confident we can get the suppliers we need from around here'.

"Local farmer Ian Elliott said he had not heard of any farmers committing to the company and believed Arapuni would have a hard path ahead in a region that was staunch Fonterra country. Gifford was involved in the construction of the New Zealand Dairies plant in South Canterbury and said there was no chance now of getting the plant finished in time for next spring, given current delays around funding and consents. 'This has taken a good six months out of it now', he said." Appeals were eventually lodged by the Ngati Koroki Kahukura Trust around a number of concerns, including long term water extraction, monitoring and the Trusts roles as tangata whenua. At the beginning of 2011, talks between the developers and the Maori opponents began with a view to avoid an Environment Court appeal, however at the date of writing, no agreement had been reached.

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Russian Takes Control Of Waiwera Water

Waiwera Water New Zealand Limited Mikhail Khimich, Russia (60%), John Donald St Clair Brown, New Zealand (40%) received approval to acquire a freehold interest in ten hectares of land at 7 Upper Waiwera Rd, Rodney. The vendor was Waiwera Valley Properties Limited John Donald St Clair Brown, New Zealand (100%). Consideration was stated as $1,001,000, plus the loan amount outstanding as at settlement date pursuant to a loan agreement between the Vendor and PHC Treasury Limited as varied and assigned by PHC Treasury Limited to Waiwera Water New Zealand Limited.

The OIO states: "The Applicant bottles, sells and distributes Waiwera artesian water. The Applicant will purchase the land to extract water from the bores on the land, and (subject to resource consent) construct a water bottling facility to bottle water taken from the land". The new owners originally planned to build an 8100-square facility, creating 13 new jobs and has consent to withdraw up to 200 cubic metres of water daily. It has signed an export and international distribution agreement with US based Brandco.

Locals however are worried about the visual impact, noise and traffic in what is a predominantly rural area. Details of their opposition were reported by Mahurangi Matters, 11/1/11, under the heading "Non-complying bottling plant draws growing opposition". "A proposal by Waiwera Valley Properties to build a water bottling plant on Upper Waiwera Road has ignited strong opposition from neighbouring residents. Auckland Council has advertised the non-complying resource consent application, with submissions closing on February 7. Residents were meeting on the weekend to discuss how best to fight the proposal, which they say is 'totally inappropriate' in a rural environment. Resident Marsden Robinson, who lives almost opposite the proposed plant, says if the factory is approved, he will apply to set up a scrap metal yard and brothel on his property. 'We moved to Waiwera, from the centre of Pakuranga, 18 months ago for the peace and quiet', he says. 'Rodney District Council's plans gave no indication that this site could ever become industrial. We relied on Council's advice when we chose to live in this quiet, pristine valley."

Bitter Opposition

"'Opposition from people in the Valley to this proposal is very bitter and we will fight it every step of the way'. Mr Robinson says 'plant' is just a fancy way of dressing up what will in fact be a factory to manufacture bottles. He opposes the proposal on the grounds that it is inappropriate to site an industrial plant in a rural valley and Weranui Road, which adjoins Upper Waiwera Road, is on a school bus route and is not of a standard to handle articulated trucks. He says the factory will also generate unacceptable noise levels from both trucks and pumps, and light spill. Waiwera Water originally submitted a consent application for an 8,000 sqm building, but this has been scaled back to 3,100 sqm in the current application. They are seeking consents to run a six day a week operation, from 7am to 6pm. The number of vehicle movements for trucks will be ten per day for bottle blowing on-site and 25 per day for bottle blowing off-site.

"According to the application, the site was chosen because it would enable the applicant to produce bottled water still sourced in the Waiwera Valley, while locating the plant away from a residential area. A water take consent for 200m³ per day has already been approved, but consents are still being sought for stormwater and wastewater discharges, and for earthworks activity of 2.3ha.This revised proposal also moves the location of the building back from the road and includes landscaping effects such as earth mounds alongside the front of the property and trees being planted to provide screening of the facility.

Waiwera Valley Association sub-committee chair Sandy Thode, who has owned the property next door for 22 years, says the application makes a mockery of Council plans. 'It's against Council rules to build an industrial plant in a general rural area so it just shouldn't happen', she says. 'They say that they want to bottle the water at source but that seems more like a branding exercise for their overseas sales. 'We're afraid that if this gets the go ahead, it could set a precedent'. Rodney Councillor Penny Webster says that it is the Resource Management Act (RMA), which allows people to apply for a non-complying consent. Cr Webster sat on the technical advisory board which last year looked at reforms to the RMA.

"'We recommended that the categories be changed to discretionary, non-discretionary and prohibited to give people more surety, but the recommendation was opposed by Local Government NZ', she says. 'We felt that a prohibited category would set the bar too high to be challenged'. In the case of the Waiwera proposal, Cr Webster says that at least the application is fully notified, giving everyone a chance to lodge a submission. She says submissions should be clear about what residents want and what they would be prepared to accept if a mediated settlement was reached. Waiwera resident Jo Floyd says the cumulative effects of the proposal will significantly change life for neighbours. 'These will include traffic and road noise, industrial noise and the long term effects of the water take, which I don't believe have been properly investigated', she says. 'The impacts are substantial if taken in total'. Jo says the people of the Valley are passionate about where they live. 'What's the point of having Council plans? What the RMA is virtually saying is that if you have sufficient funds, you can do what you like."...

"Water has been bottled at Waiwera since 1875. In 1980, the Auckland Regional Council drilled a 406 metre deep bore at Waiwera beachfront to monitor the effect of thermal groundwater use. In the 1980s water levels had fallen to one metre below sea level and concerns were raised about the sustainability of the extraction levels. Part of the reason for this was that allocations were being exceeded. When the water level falls below sea level, conditions exist for cold sea and shallow fresh water to enter the aquifer at the coastal and landward margins of the aquifer. By 1985, universal metering of water use and annual allocations to consent holders was instituted. A management water level in the beachfront bore of 0.5 metres above mean sea level, averaged over 12 months, has also been adopted.

Water levels have improved since the mid-1980s. Greater efficiency of pool water use, the new bore at the thermal pools, reductions in use and compliance monitoring of consented allocations have contributed to this improvement. Waiwera Thermal Pools, including Waiwera Water, is the largest single user of the Waiwera aquifer, with an allocation of just over 60% of the annual total allocation of just under half a million cubic metres. The pools consent is due to expire this year to coincide with the common expiry date of the other 50 odd consents to bores, which use the resource".

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Other October Decisions

In another mining-related decision, RK Murdoch Pty Limited Stephen Robert Murdoch, Australia (50%), Robert Francis Murdoch, Australia (33.3%), Jennifer Kay Murdoch, Australia (16.7%) received approval to acquire a freehold interest in 59.8 hectares of land at State Highway 65, Springs Junction. Consideration was $360,000, or just $6,000 per hectare. The vendor was Keita Valley Limited Dean Gidall, New Zealand (33.4%), Sally Gidall, New Zealand (33.3%), Ronald Harding, New Zealand (33.3%).

The OIO states: "The owners of the Applicant are already involved in the mining and crushing of lime in Australia. The rationale for the investment is that there is a growing market for crushed lime in New Zealand in the mining and agricultural sectors. The land contains a disused lime quarry. The Applicant plans to reopen the quarry and a crushing and grinding circuit will be constructed by the Applicant over the next five years as the mine is developed. The mine will then produce fine lime for use in agriculture and in controlling acid water in mining".

Ultra Merit International Limited Nancy Wong, Hong Kong (Special Administrative Region) (100%) received approval to acquire a freehold interest in 10.8 hectares of land at A/169 Union Road, RD3, Pukekohe. The vendor was Frederick Edward Strange, Richard George Wilson and Anne Catherine Albrecht as trustees of the Dungowan Trust New Zealand (100%); consideration was $1,434,375. The OIO states: "The Applicant's shareholder owns a majority (60%) share of The Thoroughbred Trader Limited (TTT) whose primary business is to acquire thoroughbreds and train them for racing in Hong Kong, Macau and Singapore. The Applicant proposes to acquire the land to develop it as a thoroughbred horse break-in, spelling and training facility. The acquisition will ensure that TTT is well positioned to meet the increasing demand for horse training services".

Overport Lodge Partnership Peter John Chambers, Australia (75%), Mark Peter Jones, New Zealand (25%) received approval to acquire a freehold interest in 20.3 hectares of land at 259 Grange Road, Burnham, Canterbury. The vendor was Grange Farm Limited Keith James Neylon, New Zealand (100%); consideration was $2,127,500. The OIO states: "The land to be acquired (Land) is a racehorse training and breeding facility. The Applicant partnership has been specifically formed for the purpose of owning and leasing the land to Mark Jones Harness Racing Stables Limited which is owned by Mark Jones. The proposal enables Peter Chambers to relocate his broodmares to a facility in New Zealand that is managed by Mark Jones, an up and coming trainer. Mark Jones will acquire a 25% ownership interest in the land, with an option to increase this to 50% over the next three years".

Vineyard At Te Awanga Limited Ralf-Roger Weiss, Germany (100%) received approval to acquire a leasehold interest in 15 hectares of land at Clifton Road, Clifton, Hawke's Bay, for $326,000. The vendors were Angus John Gordon, and Dinah Annette Gordon, Angus John Gordon, Stephen Alexander Greer and Frederick Anthony Girvan as trustees of the Angus Gordon Family Trust New Zealand (100%). The OIO states: "The Applicant will lease the land to grow grapes for supply to Elephant Hill Estate & Winery Limited. The sole shareholder of Elephant Hill Estate & Winery Limited is Ralf-Roger Weiss. The grapes will be used to make wine for domestic consumption and export". See our July 2002 commentary for details another purchase in the area by Weiss, where Elephant Hill Winery is based.

Oy Ocasor Ab Fredrik Vilhelm Rosenlew, Finland (57.4%), Wilhelm Sebastian Rosenlew, Finland (42.6%) received approval to acquire a freehold interest in 1.1 hectares of land at Tuki Tuki Road, Hastings. The vendor was the Hastings District Council New Zealand (100%); consideration was $120,000. The purchase allows the Finish applicant, secure access to an 862 hectare forestry block it owns nearby.

And finally for October, Wholesale Distributors Limited Australian Public (99%), New Zealand Public (0.8%), Various overseas persons (0.2%) received approval to extend a leasehold interest in 0.6 hectares of land at 104-118 High Street, Motueka. The vendor was Motueka Market Limited Roger and Helen Gibbons, New Zealand (100%); consideration was stated as confidential. Wholesale Distributors is the property owning vehicle for Progressive Enterprises which operates the Foodtown, Countdown and Woolworths supermarket chains. This deal extends the lease for the existing Fresh Choice supermarket on the site.

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