Venture capital raising for small-scale forestry in the Queensland wet tropics : a strategic alliance view

Sharp, Brian W. (2002). Venture capital raising for small-scale forestry in the Queensland wet tropics : a strategic alliance view Honours Thesis, School of Economics, The University of Queensland.

       
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Author Sharp, Brian W.
Thesis Title Venture capital raising for small-scale forestry in the Queensland wet tropics : a strategic alliance view
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2002
Thesis type Honours Thesis
Total pages 88
Language eng
Subjects 14 Economics
Formatted abstract Recent plantation forestry establishment rates appear to place Australia on track to achieve the Plantations 2020 Vision. Closer analysis reveals a growing large-scale segment, with anecdotal evidence suggesting landowners are unable to attract private venture capital to establish small-scale plantations. Given the limited supply of land suitable for establishing large-scale plantations, encouraging small-scale plantations in areas such as the Queensland Wet Tropics appears vital for achieving the long-run Plantations 2020 Vision.

Limited literature is available on privately sourced venture capital for small-scale plantations. The research problem this thesis seeks to address is how venture capital can be used to fund small-scale forestry on private land. A number of research questions are explored to analyse capital supply and demand conditions for small-scale forestry in the Queensland Wet Tropics. The issues of irreversibility, required rates of return, systematic and intrinsic risk and transaction costs are considered. This thesis postulates a Strategic Alliance model for small-scale plantations as an alternative to traditional hierarchical methods used by large-scale public and private forest enterprises. The model is appraised for accommodating third party investors and numerous discrete agents.

Field research by way of a survey of North Queensland forestry professionals and a survey of potential Australian venture capital providers was conducted to explore the research questions due to the lack of empirical data on small-scale forestry venture capital and strategic alliances in the segment. The evidence presented in this thesis suggests that up to $50 million could be raised from capital markets to establish an initial 10,000 ha of small scale plantations in the Queensland Wet Tropics. However, returns based on timber benefits alone are unlikely to satisfy investors. The research reveals that investors require an Internal Rate of Return of 12 per cent from small-scale forestry ventures and that financial innovation is required to create markets for plantations, allow a commercial value to be realised from ecosystem services, facilitate cash flow for landowners and ensure liquidity for investors. Strong leadership will be required by government with regional consultation and alliances to maximise the benefits from plantation expansion and the 2020 Vision. This thesis finds that unless landowners can attract long-term patient capital, the segment is unlikely to grow or make a substantial contribution towards achieving the Plantations 2020 Vision.


 
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