Key Points:

The Government has given state-owned forestry company Timberlands the axe.

State-owned Enterprises Minister Trevor Mallard today announced the loss-making entity's assets would be transferred to Crown Forestry.

The SOE has hit the rocks in the past two years after reporting financial losses totalling $13.5 million.

Last year the Government provided a "letter of comfort", assuring the company adequate funding would be provided to meet any financial obligations until July 2008.

Timberlands slashed jobs in December in an attempt to restructure.

But Mr Mallard today said it was time for the curtain to be drawn on the SOE, which was failing as a business.

A recent audit of the forestry estate, completed late last year, showed future harvest yields were much lower than previous estimates due to difficult growing conditions on the West Coast and high wind damage.

Mr Mallard said as a result Timberlands was no longer able to fulfil its obligations under the State Owned Enterprises Act and would be wound up once its assets were transferred to Crown Forestry.

Forestry Minister Jim Anderton said the transfer would create management efficiencies.

"Crown Forestry intends to negotiate commercially sustainable supply contracts with West Coast timber mills once the current contracts have expired."

Future replanting would be determined after a further stocktake of the forestry estate over the next two years, he said.

Timberlands hogged headlines in 1999 after investigative author Nicky Hager published a book, Secrets and Lies, detailing the public relations strategy it used to discourage opposition to native logging.

After the election of that year the Labour-led Government imposed a ban on the logging of giant beech by Timberlands over 130,000ha of West Coast land.

About 30,000ha of the land was added to national parks and reserves but 100,000ha went into the general conservation estate, with West Coasters paid $120 million as compensation.

- NZPA