FACTBOX - Carbon Offsets, Wood Chips Fuel Forests Interest

Reuters, PlanetArk 29 Oct 09;

Forests are a growing investment prospect as climate incentives place new value on wood chips and standing trees, say fund managers.

An economic recovery will also drive demand for more traditional products such as pulp and lumber, investors say.

Following is a summary of some recent forest fund-raisings and deals.

1. Phaunos Timber Fund

Funds: $550 million

Regional focus: owns and manages 17,000 hectares in Brazil, and land elsewhere in East Africa and Uruguay.

Strategy: Plant on grassland sites. Focus is commercial forestry. "Not in the business of carbon" offsets but wood fuel will in the future be a "huge part" of their business.

Expected returns: 8-12 percent annual returns over 5-6 years

2. South Africa's Standard Bank to launch a fund

Funds: expected A$250 million ($230 million)

Regional focus: Australia

Strategy: sell carbon offsets to companies facing emissions limits under Australia's prospective carbon trading law. Will fund planting and management of 50,000 ha

Expected returns: N/A

3. Oil firm BP

Funds: paying $2.5 million

Regional focus: Australia

Strategy: fund a eucalyptus plantation, and earn a share of resulting carbon offsets

Expected returns: N/A

4. U.S. forest managers Trilogy Green Forest Partners and Westbury Capital Partners

Funds: target $100 million

Regional focus: south-east United States

Strategy: Manage forests for timber and pulp. Also expect growth in wood pellet and carbon offset revenues

Expected returns: exceeding 15 percent over 12-15 years

4. Brazilian beef group J&F, ag. firm MCL, and two pension funds

Funds: created a $600 million capitalised company, Florestal

Regional focus: Brazil

Strategy: supply wood for industrial fuel use

Plant eucalyptus on 335,000 hectares of degraded pastures to supply wood chips for power generation

Also expect to earn carbon credits in the future, given that a hectare of eucalyptus absorbs 12.5 tonnes of carbon per year, executives said.

Expected returns: N/A

5. Clenergen

Funds: raising $30 million

Regional focus: Guyana, India and Ghana

Strategy: planting fast-growing bamboos, trees and shrubs, to produce biomass fuel for domestic and export energy markets

Expected returns: 30-56 percent annual returns over 8 years

(Editing by James Jukwey)