Sawmill venture under investigation

FEASIBILITY STUDY: Fritz Frohlke (left), Warwick Neumann, Cui Jianguo, David Trewavas and Fenglin Group general manager Gaofeng Wang.

Up to 250 new jobs could be created in Taupo if a feasibility study shows that a new sawmill and associated wood-processing plant is viable.

China-based Fenglin Group last week visited Taupo to gather more information for the study, which is due to be completed by early 2016.

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

If the project went ahead, it would be an estimated US$250 million ($390 million) investment to build the plant, with up to 250 jobs, many of them skilled positions, being created, said Enterprise Great Lake Taupo general manager Fritz Frohlke.

"What is really exciting is the opportunity to add value to these logs before they go offshore, generating real economic benefit for our district. And of course, using geothermal clean energy will set a new benchmark for this industry and will put Taupo and New Zealand on the global geothermal energy innovation map."

The wood-processing plant would use geothermal direct heat to dry the wood to the standard required for it to be made into MDF board. Fenglin Group, a listed company on the Shanghai Stock Exchange, already operates several MDF plants in China, but uses eucalyptus timber, which is inferior to radiata pine. Taupo is seen as a possible site because of its easy access to forestry, high-pressure high-temperature geothermal heat, central location and labour force.

"MDF is a commodity product," said Mr Frohlke. "It's a very fine-margin product where every cent counts and most people use gas to drive the MDF heat requirement. It requires a lot of heat to dry those boards and geothermal gives a 45 per cent advantage over gas - that's one of the reasons that Taupo works so well."

Mr Frohlke said after Enterprise Lake Taupo put the business case together, it approached several potential stakeholder companies. Fenglin Group sent a delegation to Taupo to verify the business case and has now appointed a New Zealand project director, Warren Neumann, and launched its own study.

The middle quality logs that would be processed in Taupo are currently shipped offshore unprocessed, and Mr Frohlke said not interfering with the supply of wood to existing New Zealand manufacturers was an important consideration.

"We've done a lot of work to make sure that [Fenglin Group] have got a supply of those logs and they're not the logs Tenon are using or that Kinleith are using."

Fenglin Group will have a team based in Taupo shortly to work on the feasibility study and from there the decision would be made by the Fenglin Group board next year. If the project goes ahead, it would want to purchase some 50ha of land to build the mill and plant.

Mayor David Trewavas said the project would leverage the district's strengths.

"This is potentially a multi-million-dollar investment that will not only create employment opportunities but further strengthen ties with one of our country's largest trading partners."

Fenglin Group chairman Cui Jianguo said if the project progressed, it would be a win-win for New Zealand and China.

"New Zealand wins as we would process these logs onshore here rather than in China. This would add more value to the product before it is shipped, generating more money into the local economy and creating jobs. China wins as we will have a higher quality product as radiata pine is far superior to the eucalyptus that we currently process."