electricity and carbon value adding

See guys,they are wanting to pluck you,THAT is why everybody is so coy,YOU HAVE AN INVESTMENT THAT EVEN WHEN YOU CUT THE TREES,THE CARBON SINK VALUE IS STILL THERE BURIED IN THE GROUND CALLED STUMPS AND ROOTS.

wE ARE SITTING ON A GREEN GOLD MINE




Origin's $26m investment has potential to grow like its treesELIZABETH KNIGHT
July 17, 2009
Grant King, the chief executive of Origin Energy, has become one of Australia's biggest farmers - in a de facto sense. He is an early convert to the notion that emitters such as Origin have to find the cheapest way to produce credits to offset the carbon they produce.

So it is buying trees.

Its initial investment is a relatively small $26 million to plant 6 million trees over three years, but it has taken options to increase this to an investment of $169 million depending on how the Federal Government's emissions trading regime ultimately shapes up.

This could provide Origin with an early mover advantage or leave it with a $26 million investment in credits that it could sell on the voluntary market. (For example, the carbon credits could be sold to an airline whose passengers wish to voluntarily offset their emissions from flying). At this point there is still much uncertainty about when this legislation will pass through the Senate. The minor parties and the Liberals are blocking passage of the bill, and it is expected that it will be resubmitted in a few months, and on the most optimistic estimates will find its way through by the end of the year.

To date most large corporate emitters have been happy to sit back and wait until regulatory certainty emerges. However, there is every chance if legislation is passed and agreement has been reached on a trading scheme, then there will be a new market in land banks that are capable of producing trees to offset carbon emissions.

Of course, corporates will be free to buy traded carbon credits on a market, but they will have no ability to control pricing.

Origin's view is that buying land of little use for anything else on the cheap - and arranging for someone else to plant and manage it - is a reasonable insurance policy.

It makes sense that it sets up a mechanism to do this now and waits until the trading system is up and running before it needs to exercise options to enlarge its investment in trees.

If King has made the right call, it's easy to see how Australia's corporate emitters could be lining up to follow suit. It will be great news for the those owners of near-arid land like that Origin has chosen. It has acquired the land quite cheaply and will plant a particular species of Mallee eucalypt which can be grown densely, will live a long time and can thrive in just about any conditions.

Australian corporates are lucky in that we are rich in mineral resources (whose processing and secondary production create pollution) and in land suitable to grow trees to offset the carbon emissions.

At first glance this potential thirst for trees looked like the ideal "get out of jail free card" for all those banks of forestry assets that are up for sale thanks to the demise of the management investment schemes Great Southern and Timbercorp.

But it's not that clear cut. Although these trees will be marketed at knock-down prices (forgive the pun), they are probably worth more as harvested timber than as a carbon sink.

The plantation trees are grown on more expensive land and are priced for rotation - i.e., once the timber is harvested, new trees are planted; they are designed to provide an earnings stream. Plantation trees don't have longevity.

So Australia's corporate emitters are not coming to the rescue of tax minimising MIS investors. They will need to rely on hungry Japanese timber users for this.

But the big MIS schemes do have land banks that could potentially be of interest - at the right price.

Origin has made it clear that if the Government's carbon pollution reduction scheme pans out the way it expects, then the energy producer will be in the market for more land/tree investment to increase the size of its carbon sink. And it won't be alone.

Call it a bet. Call it an investment. Origin calls it part of its overall portfolio approach to managing its continuing liability under the proposed carbon pollution reduction scheme.

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