Midway strikes $350m forest deal with Munich Re as carbon credits take off

The deal will see a German group buy one Victorian plantation from local forestry company Midway just as the carbon credit market takes off.

A Midway plantation in south west Victoria. Photo: supplied

Australian forestry company Midway has unveiled a $350m deal with MEAG, a subsidiary of insurance giant Munich Re, which will see the pair dramatically expand Midway’s forestry operations.

The transaction is one of the first to capitalise on a recent update to Australia’s Emissions Reduction Fund method of dealing with plantation forestry, which will provide more opportunities for the industry to earn carbon credits.

Split into two processes, the transaction involves a $154.1m payment for Midway’s 17,000 hectare plantation in south west Victoria, as well as a further $200m to be invested in new hardwood plantations in the region over the next five years.

A Midway spokesman said a major draw for the German-based buyer was Australia’s carbon credits scheme that incentivised removing carbon from the atmosphere.

“That $200 million will go towards planting new greenfield plantations, which attract Australian Carbon Credit Units, which is very attractive to overseas investors,” he said.

“It’s a major investment for the south west region, and it’s a model that will be replicated in other parts of the country, including Tasmania and Midway’s operations up in the Tiwi Islands.”

Midway said the deal demonstrated a shift in the forest management sector, removing the need for timber investment management organisations and promoting sustainability.

“Midway has high aspirations to be an ethical plantation fund manager, and those aspirations go above and beyond government legislation for environmental and wildlife protection,” the company said.

Midway’s managing director Tony McKenna said that “when complete, the change in ownership and control of the plantation estate will simplify the Midway balance sheet and remove annual valuation changes in biological assets that have previously created volatility in the valuation of company held assets”.

“The proceeds of the transaction and the ongoing management revenue will support our existing business and allow Midway to develop initiatives that will reposition the company for long-term growth,” he said.

MEAG board member Holger Kerzel presented Australia as a key market for future growth as demand for carbon negative and net-zero operations continues to increase. “MEAG identified the Australian hardwood production sector as a key growth opportunity in global forestry,” he said.

Mr Kerzel also highlighted Midway’s potential as “a platform for significant new commercial hardwood forestry investment that meets our criteria especially for sustainable investments”.

Originally published as Midway strikes $350m forest deal with Munich Re as carbon credits take off