Chinese company puts plans on hold

Taupo mayor David Trewavas (centre) with the Fenglin Group management team during a visit to one of Fenglin's plants in China last year.

A Chinese company that was seriously investigating building a sawmill and wood-processing plant in Taupo has put the project on hold to focus on buying a competitor.

China-based Fenglin Group, a listed company on the Shanghai Stock Exchange, had been undertaking a due diligence study on the possibility of basing part of its operation near Taupo.

The company was approached in January 2015 by economic development agency Enterprise Great Lake Taupo (EGLT), which has spent two years working with various entities to attract a business to do a feasibility study on constructing, owning and operating a sawmill, laminated veneer lumber and medium density fibreboard plant near Taupo. Radiata pine logs would be processed using geothermal energy before being shipped to China.

The project investment was estimated at US$250 million ($390 million) to build the plant, with up to 250 jobs, many of them skilled positions, being created.

Fenglin Group sent a delegation to Taupo last September to verify the business case and appointed a New Zealand project director.

Enterprise Great Lake Taupo general manager Fritz Frohlke said in all Fenglin Group invested more than US$1 million in seriously examining a Taupo option, attracted by its easy access to forestry, geothermal heat, central location and labour force.

Mr Frohlke said EGLT had put together a solid business case which showed the payback would be between four and six years, and New Zealand Trade and Enterprise had also contributed some money from its Strategic Investment Fund.

But the Taupo project was put on hold last month when Fenglin's board decided instead to pursue the chance to purchase competitor Weihua Corporation.

"The Fenglin board at the time said that the Taupo project is just one too many things and would distract them at the time that they're buying their competitor," Mr Frohlke said.

The company was still interested in pursuing the Taupo opportunity but could not give an indication of when.

"They have literally parked it but want to be kept informed and keep a watching brief."

When Fenglin Group chairman Cui Jianguo wrote to EGLT last month, he said the company was grateful to EGLT for bringing the opportunity to them.

"Myself and our entire team have never lacked overwhelmingly good impressions and lasting memories of the conducive business environment, efficient and friendly people at all levels of meetings and all places we went in New Zealand, and in Taupo in particular," Mr Jianguo said.

Fenglin was one of eight companies identified as having the capital and market share to build a wood-manufacturing plant in New Zealand and so far EGLT had only approached three, Mr Frohlke said.

He said a small part - about 12 per cent of EGLT's annual $350,000 budget - was spent attracting high reward projects and the chance of them not coming to fruition was always high.

"These are the large projects that we work on and they are very high risk. Those guys spent around US$1.2 million to date and then they walked away. They hired consultants, got resource consents advice, did plans."

EGLT has two other large investment projects on the go One is in the wood sector and could potentially employ 20 to 40 staff and the other is in an unspecified industry and could employ up to 80.

Taupo district mayor David Trewavas said while he was disappointed with the news, he was still confident that the proposal would be successful, and he hoped that Fenglin would pick the project up again in future.