New Forests grows investment in eucalyptus plantations

Investment firm New Forests has announced an additional equity investment in its first Asian forestry investment, a eucalyptus plantation business in Sabah, Malaysia. At a ceremony in Kota Kinabalu, the new investment into Acacia Forest Industries Sdn Bhd (AFI) from New Forests’ Tropical Asia Forest Fund (TAFF) was welcomed by the Sabah Forestry Development Authority (SAFODA), which is a joint venture partner in the plantation business.

The additional investment comes nearly five years after TAFF’s initial investment in the Hijauan Group. The group’s subsidiary company Hijauan Bengkoka Plantations Sdn Bhd (HBP) is a joint shareholder of operating plantation company AFI alongside SAFODA, a Sabah State government agency involved in reforestation development. The additional investment will be made by TAFF via its majority ownership of the Hijauan Group. New Forests, on behalf of TAFF, has worked together with SAFODA to enable this further equity investment to continue to execute on AFI’s strategic plans for improving plantation quality and transitioning the company to a higher value sawlog production model.

Paul Speed, Director of Investments and Operations for New Forests in Asia and Chairman of HBP noted, “Since our initial investment in the Hijauan Group, we have worked towards improving the quality of the AFI plantations and ensuring AFI’s position as a leading plantation company in Sabah. We have already implemented significant capital investments, such as construction of a new state-of-the-art nursery, refurbishing facilities and housing, and supporting local water infrastructure projects. The further equity investment by TAFF over the next five years will ensure that strategic initiatives like these can continue to be implemented through the AFI business.”

AFI is headquartered in Kota Kinabalu with plantations located on the Bengkoka Peninsula of northern Sabah. Since 2015, AFI has switched from planting primarily Acacia mangium to Eucalyptus pellita, a crop that offers additional market versatility and better resilience to locally prevalent tree diseases. The new seedling nursery opened in January 2018 with a production capacity of 2.5 million seedlings per annum.

To meet New Forests’ environmental and social investment requirements, AFI has run a multi-year social engagement program culminating in a participatory mapping exercise that completed in 2016. AFI has since developed a new social forestry strategy based on the outcomes of engagement and the need to address land tenure and support local livelihood opportunities. With the additional investment from TAFF, AFI will continue to focus on re-establishment of its commercial plantations while also piloting new models for outgrower forestry in the Bengkoka Peninsula.

New Forests’ TAFF is a USD 170 million fund that launched in 2012 as the first forestry fund dedicated to sustainable forestry in Southeast Asia. The fund has since taken equity positions in three forestry businesses in Malaysia, Indonesia, and Laos. These investments encompass more than 150,000 hectares of land with the target of managing and establishing more than 60,000 hectares of certified plantation forests.

Source: New Forests Pty Ltd

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