Tautuku Hauha Farming Limited Partnership
Over the last 30 years, the various owners within the Tautuku Māori Lands have been investigating and studying ways to improve and develop their lands to provide an economic return. During this period, native logs were harvested, exotic plantations were planted, and land was leased to third parties for pastoral farming.
A number of these ventures were not successful, with the misallocation of revenue and funds between owners (after native logging) (creating liabilities between owners and the TWLT after Māori Court orders) and tenants having to be removed by the Māori Land Courts for non-payment of rents.
Three years ago, the owners and trustees from Tautuku Waikawa Lands Trust, Blk 13 Sec 15, Block 14 Sec 2 & Block 13 Sec 14 investigated a farm development program with the view of setting up a beef unit. The capital costs for fencing and yards are immense.
In July 2022, Tamata Hauha was introduced to key personnel, and they offered to partner in a joint venture, contributing development capital and expertise over 20 years to develop Carbon and Forestry Assets on the land.
The group, including Mainland Financial Planning Limited, reviewed their offer and looked at management structures to best develop this opportunity, allow all blocks involved to benefit based on their share equitably and allow easy day-to-day management.
Structure of the Tautuku Hauha Farming (TLHLP)
The Tautuku Lands Hauha Farming Limited Partnership (TLHFLP’) was established to manage the project in conjunction with Tamata Hauha, the development partner.
Rather than request capital funds to invest in and develop the landowners’ lands, the only requirements of the landowners were the agreement of a long-term land lease and the assignment of forestry rights to the TLHLP.
The Limited Partners (landowners) were issued units of ownership within the TLHLP based on the estimated revenue contributed by each block.
Annual distributions (when profit is earned) will be allocated based on the income earned from each Limited Partner’s block of land, using the LP’s gross profit model (income less direct costs and retentions/reserves).
This calculation is monitored annually and will see shifts in revenue percentages. Different blocks will have differing cash flow earned as development revenue comes on stream and the possibility of extra land and blocks becoming part of the TLHFLP.
Over its lifetime, the TLHFLP portfolio is expected to pay owners regular distributions far more than what a traditional farming operation could offer.
Many forecasters estimate that carbon prices will need to rise towards or above $170/t CO2-e to meet New Zealand’s carbon reduction targets. The LP initial budget has modelled average carbon sales at $80/t CO2-e indexed to inflation of 5% for the first 10 years.
Current unit prices are $64/ton.
Land Development Plan
The blocks will be developed in stages.
Stage 1—Trees were planted on several blocks in 2022. Unfortunately, the plants’ survival was poor due to several factors, including the environment and ungulate browsing.
Stage 2 ‒ New planting and replanting in the Hayes Block was conducted in August 2024. The delay in stage two was due to extra development, pest reduction, land & legal preparation work, and consideration of other species specific to the areas planted in stage 2.
Stage 3—In the winter of 2025, a native podocarp block will be planted in wetland areas within Hayes Block. This will be eligible for ETS. The TLHFLP also wants to investigate various aspects of the titles and land accretion, especially in the Hayes Block, which may see further land added to stage 3.
Stage 4 will consider land acquisition opportunities and other potential carbon farming opportunities. It is expected that these stages will take 2-3 years to see tangible results.
Commercial Returns
The benefit of carbon farming compared to traditional forestry assets is cash flow. Newly planted carbon forests start receiving revenue after year 4 throughout the forest’s life (assuming the forest is registered in the ETS permanent forest category ‒ revenue over 50 years).
The share of estimated gross revenue to the LP based on $64/ton of Carbon is $448 per hectare in Year 4, rising to $832 in years 6 onwards.
Due to the partnership with Tamata Hauha and the existing forest assets that will be registered within the ETS system immediately, positive cash flow revenue will be expected in year 2.
Tāmata Hauhā Limited
The project’s development partner is Tamata Hauha, a new organisation in New Zealand with a unique position. The owners are Māori Landowners; they understand Māori land and its challenges and have extensive experience in Māori Agri advice, the Emissions Trading Scheme, and land development at a Crown level.
They are funded by a German-based bond that seeks returns, but its charter must focus on social outcomes. The bond will only partner with organisations that develop lands and assets for Indigenous people.
Tāmata Hauhāʼs public mission statement to Whenua is clear.
“Our kaupapa and focus is unashamedly for the restoration of the Whenua, its people, and their prosperity ‒ using carbon forestry as the waka! We work with you as landowners, providing you with strategies and practical funding to develop your landholdings into more productive assets.”
Source tamata.co.nz
Tāmata Hauhā roles are as follows: -
- Providing development finance for Carbon Farm or Forestry development.
- Provide expert management and oversee development, including planting, stock selection, silvicultural advice, ETS registration and management, and government (including both local & national) planning.
- Offering bespoke advice and potential funding sources for future development or stages.
Why invest in carbon?
The investment case for carbon + forestry has been strengthened by far-reaching changes to domestic climate change policies and a push by key trading partners and global corporates to do more to address climate change.
Several critical policy shifts have seen the local carbon price move from only a few dollars 15 years ago to over $60 in the last few years.
This provides an opportunity to earn attractive margins from sequestering carbon in forests and offers a medium-term hedge for those who want an offset against increasing carbon prices.
Key policy changes that have placed upward price pressure on carbon prices include:
- Annual and future emission budgets that determine the overall cap on units within the NZETS. This will interact with the emissions the economy produces and, specifically, emitters obligations within the NZETS.
- The auctioning of government-held emission units to ETS participants.
- Changing the allocation of liability-free emission units to trade-exposed sectors of the economy.
- The confirmation that exotic forests can be entered into the ETS as permanent forests
Looking ahead, it is clear that a higher carbon price is needed if the New Zealand economy has any hope of achieving its Paris Agreement targets and delivering on the transition to a low-emissions economy. For many years, the carbon price has been so low that it has been ineffectual in influencing emitters’ investment decisions and household behaviour.
“The investment case for carbon + forestry has been strengthened due to the far‐reaching changes to domestic climate change policies and a push by key trading partners and global corporates to do more to address climate change”
It also acknowledged that more action is required to quickly address the effects of climate change.
The latest Intergovernmental Panel on Climate Change report highlights this by stating that unless there are immediate, rapid, large-scale reductions in greenhouse gas emissions, limiting global warming to close to 1.5oC or even 2oC will be beyond reach.
Forests buy time by sequestering carbon from the atmosphere, offsetting emissions from households and broader economic activity. For example, one hectare of Pinus Radiata can offset the annual emissions from around 450 cars or 40 households. 1 In this regard, new forests form an important part of the plan to soak up society’s near-term excess carbon emissions while new technology and innovations are developed and implemented.
The Tautuku Waikawa Lands Trust’s advantage is that revenue can be generated with minimal effort or management while protecting the whenua.
