WET venture has growth options
13 September 2016, Andrew Ashton
A BID to boost economic activity and create new jobs for the region has led to significant investment in a wood processing venture, and the decision to pioneer a new technology here.
A WOOD processing plant being built here will manufacture a new style of building frame and could not only create 120 jobs but also pave the way for more manufacturing plants to follow.
The first ever plant to commercially manufacture the OEL™ framing for builders anywhere in the world is now being built at the former Prime sawmill site, near Matawhero.
A joint-venture company known as WET Gisborne Ltd (WGL) has been formed between Wood Engineering Technology Ltd and the Eastland Community Trust (ECT). It will apply the patented OEL™ technology on East Coast logs and sell framing into the housing construction boom in Auckland and elsewhere in New Zealand. It is also intended to manufacture product for export to Australia, Asia and further afield.
The new technology, developed and proven by Wood Engineering Technology Ltd, allows any logs — even one metre-long pieces can be used — to be dismantled and then reassembled into uniformly strong and straight structural OEL™ framing in an internationally-patented, state-of-the-art automated process.
The first plant’s production capacity will be quickly expanded by four times once the business is up and running, and will then employ 40 people in high-paying jobs keeping the plant operating on a 24 hour a day, seven day a week schedule.
Even though it is not yet in commercial production, WET managing director Peter Pettit says OEL™ framing is already in hot demand with major building companies due to the product’s uniform strength, straightness and stability (it doesn’t twist or bend).
“It is expected that many more full-size plants will be built in the Gisborne region as the demand for OEL™ grows,” he says.
“Log supply is not seen as any constraint, as such a large volume of logs are already being exported in an unprocessed state. These logs can be used to make much-needed building materials for use here in New Zealand, creating well-paid jobs in the OEL™ plants here in the Gisborne region and supporting our engineering and construction companies in the building of the new plants.
“OEL™ is a disruptive technology with very large potential, producing a better, more reliable product in a profitable, automated manufacturing plant while selling the OEL™ product at the same price as existing framing lumber is sold for,” says Mr Pettit.
“Logs entering the plant are transformed into strong and reliable framing products a mere five hours later. It is feasible for a standing tree on the East Coast to become a house frame in Auckland in as little as 72 hours,” says Mr Pettit.
Whole trees for frames
“Apart from the waste stream of sawdust chip and bark, the whole tree can be used profitably to make house frames. The heat from the wood-waste can also be used to drive the kilns and even supply electricity to power the plant.
“The factories can conceivably be off-the-grid, located in otherwise inaccessible locations right near the forests.”
Wood Engineering Technology was formed in 2003 by a group of New Zealand businessmen with extensive international, technical and commercial track records in forestry, wood processing and bringing emerging technologies to market.
Eastland Community Trust confirmed in July this year that it would invest $4.7 million into the $9.4m joint venture. ECT had already bought the former Prime sawmill site in 2015 for $7.4m.
The first plant will be built in three stages, phased to add capacity as required to satisfy the expected growth in demand for the product. It will take approximately 14 months from today for the first stage of the plant to be fully operational.
Site works have begun and installation will begin shortly, says Mr Pettit.
“By March 2017, management intend the plant will be installed and the mechanical commissioning phase complete. During this time the site will create seven jobs and inject $1 million into the local economy.”
Once the plant is fully operational, expected to be late 2017, it is anticipated it will create 20 jobs directly increasing to 40 direct jobs as the other stages are phased-in.
In the long term there is an opportunity to grow to three full-size plants on the Prime site, creating 120 jobs directly.
There is also potential for the creation of a large number of indirect jobs in support businesses, based on the Tairawhiti Regional Development Study of 2009 that estimated eight indirect jobs for every 10 new jobs created directly in sawmilling in the region.
Activate Tairawhiti’s participation in WET
As with many economic development opportunities for the region lately, Tairawhiti’s involvement in the WET project came about as a result of the networks and relationships of the Activate Tairawhiti (AT) board.
When the original version of the Regional Economic Development plan was completed back in July 2014, it became clear that the wood processing space was a very obvious “low hanging fruit”, says AT chairman John Rae.
“So the AT board set to work to trawl through their collective networks and contacts to identify possible counter-parties that might have an interest in investing in wood processing in the Tairawhiti region.
“One of the board members recalled a wood processing opportunity that had some time earlier been presented to, and rejected by, the Eastland Group. As a result, AT instigated a meeting with WET.”
The original proposition from WET was entirely unsuitable, in terms of the deal’s structure, from our regional development perspective, says Mr Rae.
“Also, at that time WET were looking much more seriously at Northland as their investment partner and location than Tairawhiti. However, with great support from Eastland Community Trust, Activate invested a lot of time on the relationship and also on looking to restructure the opportunity so that it could work both for WET and the Tairawhiti region.
“After much negotiation and numerous conversations we were successful in coming up with a deal structure that provided a win-win outcome for both the region and WET.
“In reality what we did was show WET that AT could quickly and decisively co-ordinate and get decisions from the key regional decision-makers and funders (in this case) and, if the deal was right, was able to deliver on very commercial timelines via a very efficient and professional process.
“To be clear, from WET’s perspective it was probably the quality of the investment engagement process that got their attention as much as the final financial terms of ECT’s investment,” says Mr Rae.
“As a region competing for investment and relevance amongst all the other regions in New Zealand, we need to remember that this must be one of our key competitive advantages. Because we are a small region, we critically need to remain nimble enough and co-ordinated enough to give prospective investors confidence that they will be dealing with a professional and capable counterpart — and that they not be mucked around when they turn up to do business.”