pulp mill invalid, page-125

Thanks to everyone for his opinions.

1. Land value.

Gambier, if you agree the freehold lands are worth $3-4000/ha, then it's easy to understand why GNS lands are about $2400/ha.

This is because all GNS lands are encumbered with trees in 10- or 13- or 28-year rotation and the buyer will not be able to collect rent in the remaining period of the rotation. Thus the encumbered land value has to be less than the unencumbered lands (say $3500/ha) by taken away the rent (6% of the freehold land value, that's $210/ha/annum) in the remaining period of the encumbrance (say 5.5 years on average), so the present land value is

$3500 - $210/ha/annum * 5.5 year = $2345/ha (less than $2400/ha)

Originally in the earlier posts of this very thread, I argued that if the encumbered GTP lands of MIS projects had put on market, in practice the value would have a 40% discount. So if the free-hold land price is $4000/ha, they would be worth $240/ha on market. Lordolean seemed to have no objection to this estimate, but he said his estimation was $2400-2900/ha.

Later on we know (thanks to Lordo) GNS has a total 215,000 ha lands with a book value of $739m, so it's about 3,437/ha.

Then I took a freehold land price of $4500/ha given by Lordo, and re-valuated all GNS lands with DCF for $613m (that's $2851/ha, with 37% discount to $4500/ha).

Any way, in all my estimates there should be a roughly 40% discount to give the present GNS land value. If the freehold land price is $4000/ha, then it's $2400/ha.

2. Value of Trees

This value should be calculated as (the DCF of all proceeds) minus (DCF of all costs) during the period between now and the end of harvest.

GNS's book value for all 101,000 ha trees is $350m, about $3470/ha.

My first estimation of all those trees was $518m, big then GNS's own. My second was $205m. Now I think it may be between $250m-$300m in total or about $2500-$3000/ha.

An important point related to the tree values is that they all indicate that the plantations are NOT viable financially. The total cost of those trees is

establishment cost ~$2000/ha,

plus management cost ($200/ha/year) and rental ($240/ha/year) in the past ~6 years (of the average tree life), that is ($200+$240)/ha/year * 6 year = $2640/ha,

which is $2000/ha + $2640/ha = $4640/ha, far greater than what they can sell (e.g. GNS's book value $3470/ha).