2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

Note 17Forestry assets Council GroupActual Actual Actual Actual2012 2011 2012 2011$000 $000 $000 $000Balance at 1 July 1,601 1,909 1,601 1,909Increases due to purchases, replanting 90 60 90 60Gains/(losses) arising from changes in fair valueless estimated point of sale costs (236) 147 (236) 147Decreases due to harvest (226) (515) (226) (515)Balance at 30 June 1,229 1,601 1,229 1,601◊◊◊◊PNCC owns two investment forests; Turitea andGordon Kear. The forest assets referred to in thisnote are limited to the biological asset, beingthe forest crop (and do not include forest land orsite improvements).Turitea Forest is located within the watercatchment reserve in two distinct blocks of pinusradiata, and comprises of the west and eastblocks totalling 63.2 hectares. The west blockwas planted in 43.4 hectares of pinus radiata,which are at varying stages of maturity rangingfrom 17 to 37 years. The east block consists of19.8 hectares of mature pinus radiata which arecurrently uneconomic to harvest and have beenwritten off.Gordon Kear Forest is a joint venture withManawatu District Council, with PNCC owning76.7% of the remaining 183.2 hectares of pinusradiata forest, which are at varying stages ofmaturity ranging from 18 to 35 years (see note19 for detail of the joint venture). Harvest of theforest is expected to continue over the next fiveyears.PNCC own 100% of the Gordon Kear Forest landand site improvements. As the joint ventureforest is harvested the forest is being replantedwith a second rotation tree crop. To date 116.9hectares have been planted with this rotation100% owned by PNCC.◊◊During the 2012 period 26.5 hectares of forestwere harvested from Gordon Kear Forest.Forestry assets (biological assets) were valuedas at 30 June 2012 by an independent registeredforestry consultant Alan Bell (Registered ForestryConsultant - NZ Institute of Forestry) of AlanBell & Associates. A pre-tax discount rate of10% (2011 10%) has been used in discountingthe present value of expected cash flows todetermine fair value of the forestry crops.Valuation has been on a going concern basisand only includes the value of the current crop,based on current average costs and three yearhistorical rolling average sales prices. The forestcrops are valued on an annual basis.Financial risk management strategies◊ PNCC is exposed to financial risks arising fromchanges in timber prices. PNCC is a long-termforestry investor and does not expect timberprices to decline significantly in the foreseeablefuture, therefore, has not taken any measures tomanage the risks of a decline in timber prices.PNCC reviews its outlook for timber pricesregularly in considering the need for activefinancial risk management.Financial Statements Note 17Note 18Investment property Council GroupActual Actual Actual Actual2012 2011 2012 2011$000 $000 $000 $000Balance at 1 July 15,468 16,040 15,468 16,040Additions and acquisitions 1 68 1 68Fair value gains/(losses) on valuation (note 6) 72 (640) 72 (640)Balance at 30 June 15,541 15,468 15,541 15,468◊PNCC’s investment properties are valuedannually at fair value effective 30 June. Allinvestment properties were valued basedon open market evidence to determine fairvalue. The valuation was performed by Paulvan Velthooven (FPINZ, FNZIV, BA, BComm) ofMorgans Property Advisors.◊Whilst PNCC does not have any contractualcommitment for capital expenditure, there isan intention (as detailed in the Property AssetManagement Plan) to maintain and renew allinvestment property.◊There are no contractual obligations in relationto investment properties at balance date but notrecognised in the financial statements for eithercapital expenditure or operating expenditure.Palmerston North City Council Annual Report 2011/12165