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City Forests seeks $3m carbon credits profit

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Dunedin City Council-owned City Forests is targeting a revenue boost of up to $3 million this financial year from sales of carbon credits, possibly to international interests.

Of its total 16,100ha forestry holdings, about one-third are eligible under the Kyoto agreement to produce carbon credits, City Forests chief executive Grant Dodson said, when contacted, yesterday.

“Our objective is to gain our carbon credits from Maf (the Ministry of Agriculture and Forestry) in January next year, and have them sold between April to June,” Mr Dodson said.

Mr Dodson based his carbon credit sales estimates on having 100,000 credits for sale at a price ranging from $20 to $23 a credit, and expectations $2 million to $3 million could be sold during each of the 2009 and 2010 financial years.

He said City Forests was in the early stages of discussions with a potential international buyer through brokers, but declined to give further details.

The international credits are sold through New Zealand brokers to governments signed up to the Kyoto agreement and holding a balance of credits or to overseas companies, excluding European companies.

Mr Dodson said City Forests would expect to sell an increasing number of credits in following years as its forests matured and sequestered more carbon.

For the June 2008 year, City Forests’ after-tax profit was down from $4.8 million to $1.4 million, because of the strength of the New Zealand dollar and increased sea-freight costs to Korea.

This prompted a 20% reduction in the harvest to 22,800cu m.

Earlier this month, Southern forester Ernslaw One sold more than $10 million of carbon credits to the Norwegian Government in what was believed to be the first international carbon credit sale by a New Zealand company.

It was understood the 520,000 Ernslaw credits were sold for $21 to $22 a tonne, earning between $10.9 million and $11.4 million depending on the exchange rate, making it the world’s largest forest-sink sale to date.

Carbon credits are traded domestically as New Zealand units but can be transferred to assigned-amount units for international trade; each credit equating to a tonne of carbon emissions.

In its half-year to December report, City Forests Ltd’s before-tax profit was well down from last year’s $2.69 million to $153,000, largely the result of forest estate revaluation.

Last year, the forests were valued at $3.5 million, but the valuation dropped to $800,000 this year, causing the $1.73 million difference in profit.

City Forests, along with the DCC’s six trading or associated companies, will deliver its full-year report on Friday.


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