Mr. Gerard Murphy:

An issue with partnerships was continuity of income, particularly after year 18 to year 20, depending on the productivity of the crop. The contracts were constructed in such a way that when we entered into a contract, perhaps at the start of year 0 or year 1, we basically gave a guarantee of an income stream on a yearly basis after the premium finishes. For example, at year 18, we might kick in with a premium. The partner in that case would get a steady annual income irrespective of whether we were thinning or not. One would only thin a crop maybe four or five times in the cycle to clear fell.

The partner in that case will get a premium on an annual basis. Usually what happens, depending on the contracts, between 20% and 30% of the value of the thinnings will also go to the partner. The partner will get a steady income every year. At the thinning stage, the partner will also get share of the profits, maybe 30%. At clear fell, the partner will get another proportion, again depending on the contract. It comes down to the appetite for risk. Many partners prefer to have a steady income stream every year with less of the profit at the end. That is why we have different types of partnerships depending on appetite for risk.

If we thinned the crop at that stage, we would do all the harvesting and haul with all costs borne by us. From the value left over after the harvesting and haul, known as the stumpage, the partner would get a certain proportion of that at the thinning stage. We would get the remaining proportion which could be somewhere around 70%. At the clear fell stage, the partner would also get a certain element of the profits. In most cases, we would then replant the crop for the partner and the forest would revert back fully to them.