March 9, 2022

photo credit – New Life Forest Restoration

By Lynda Kiernan-Stone, Global AgInvesting Media

Reflecting a first-of-its-kind transaction in the emerging “green bond” market, NewLife Forest Restoration, the leading forest products business in the U.S. Southwest, has secured $200 million in bond funding from the Arizona Industrial Development Authority (AZIDA). 

This “sustainability-linked” bond will be used by NewLife to scale up its forest restoration projects in the north of the state, and to fund the expansion of its wood products manufacturing facilities, to scale up the number of acres being restored each year.

The bond is far larger than the typical $10-$25 million bonds issued by AZIDA, noted the Arizona Daily Sun, and will be used over the next six months to fund the construction of the company’s 425,000-square foot Bellemont facility, complete with a sawmill, a planer mill, and dry kilns, which is expected to begin operations over the next six months and be fully online in 2023, and to fund an increase to the operational capacity at its mill near Heber, Arizona. 

“These funds transform our company’s ability to lift Arizona’s forest restoration efforts to the much-needed level of scale,” said Ted Dergousoff, CEO, NewLife. “Not only will we accomplish our core mission, which is to restore the health of the forests and prevent wildfires, but we will make the whole industry sustainable and profitable.”

The U.S. is the world’s top producer, and consumer, of forest products. It also has the highest per capita industrial wood consumption rate in the world. Despite this, the country’s forested area has not changed in more than 100 years, according to the USDA. Over the past two decades, both cyclical and long-term factors, such as shifting demands, the globalization of manufacturing, and the rising popularity in alternative materials have had a negative effect on the overall industry. However, there are positive forces at work here, too, including a strong focus on renewables, including renewable wood-based energy products, the emergence of mass timber, the increased use of wood in large-scale construction projects, and the maturation of nanotechnologies. 

With promising market conditions before it, NewLife – which is majority owned by California-based private equity house Lateral Investment Management –  is the largest vertically integrated forest products business in the Southeast region of the U.S., working closely with an ecosystem of local industry partners, mechanical thinning crews, and smaller forest products manufacturing facilities.

“The high value wood products we manufacture serve customers in some of the largest home building markets in the United States with the highest quality softwood products in the region,” said Dergousoff.

Through its manufacturing system, NewLife has developed a way to extract value from the low-quality fiber removed from the forest as part of the company’s restoration efforts. This expansive program significantly increases the total industry processing capacity within the Four Forests Restoration Initiative (4FRI) operating area, and enables large-scale restoration across the state.

Through its subsidiary, NewLife is contracted by the U.S. Forest Service (USFS) as part of the 4FRI initiative – a landscape scale restoration project designed to combat the impacts of climate change and to reduce the risks associated with catastrophic wildfires by bringing 2.4 million acres of forests back to their more natural state while also protecting large, healthy trees, wildlife, and the watershed. 

Since the harvested wood from restoration projects is usually lower quality and smaller in diameter, the Forest Service has typically found it difficult to secure industry partners to help it attain its goals. However, NewLife’s business model is primed to use such wood to produce engineered wood products (EWP) that are stronger than traditional wood products.

NewLife has managed Phase I of the 4FRI contract – the largest forest stewardship contract in the U.S. – since 2017, partnering with the USFS on mechanical forest thinning initiatives, and plans to expand into neighboring states.

“NewLife has reshaped the challenging economics of forest restoration,” said Richard de Silva, managing partner at Lateral Investment Management, which has already invested $100 million in the company and was a participant in this bond. “We believe that NewLife can become the engine behind a sustainable forest products industry in Arizona at the forefront of combating climate change.”

NewLife stated that its long-term plan as a company is to expand its activities in managing forest health into other states and regions as it continues to produce high quality lumber products and creating jobs in new markets.

De Silva concluded, “We think the public-private model in Arizona, which empowers local industry with NewLife’s production infrastructure at the core, will be the blueprint for forest restoration worldwide.”

*The content put forth by Global AgInvesting News and its parent company HighQuest Partners is intended to be used and must be used for informational purposes only. All information or other material herein is not to be construed as legal, tax, investment, financial, or other advice. Global AgInvesting and HighQuest Partners are not a fiduciary in any manner, and the reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information or other content on this site.

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.