Gunns regrets forest agreement involvement

GUNNS boss Greg L'Estrange regrets getting involved in the state's forests statement of principles.

"If we had our time over again, we would have got out months ago," the forest company's managing director said yesterday.

"We would have cut and run 12 months ago, sold the business and gone."

Mr L'Estrange was speaking following a release to the Australian Securities Exchange of a detailed market update, promised since late last week when Gunns agreed to a $23 million payout for exiting native forest harvesting.

He said that the company's involvement in the statement of principles and the intergovernmental agreement which came after more than a year's negotiations had provided nothing but anguish for Gunns.

"But if we had pulled out, the effect for Tasmania would not have been good," Mr L'Estrange said. "There wouldn't have been the restructure of the industry - there would have continued to be conflict."

Yesterday's market update instead revealed a company facing major transition.

Gunns told the ASX that negotiations to lock in a joint venture partner for its proposed $2.3billion Bell Bay pulp mill were well advanced but not complete.

Mr L'Estrange said that the company was still negotiating with a number of parties but was adamant that the result would be one joint venture partner.

Gunns told the ASX that the selection of an investment partner would lead to "a fundamental reshaping of the company".

The sale of assets such as the Green Triangle forest estates, the Managed Investment Scheme loan book and the possible sale of Gunns' timber processing business would be part of negotiations with potential investors in the coming weeks.

Gunns was also prepared to sell its remaining Tasmanian land and tree assets to make the pulp mill deal work.

Gunns pinpointed the next major retirement of debt in January 2012 as a key date to shape its future path.

It told the ASX that the completion of the pulp mill project equity investment process would determine how the company went about retiring the $340million scheduled debt.

If the pulp mill investment negotiations had not concluded by then, Gunns would expand its asset sales program.

Mr L'Estrange said that the company would be prepared to sell everything including its remaining Victorian and South Australian interests if necessary.

But Northern Tasmanian financial analyst Tony Gray said that the company would have to make a decision on which way to go much sooner than January.

"They probably need to have made a decision by November because if the decision is to sell more assets, they will need to have time to see it happen," Mr Gray said.

Gunns told the ASX that the sale of its remaining Tasmanian assets, including decommissioned mill sites, was expected to raise $60 million by next year.

State Environment Protection Authority director Alex Schaap said late yesterday that he still did not have all the advice needed to decide whether Gunns' permits were valid.

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