Larry Schlesinger, Australian Financial Review 1 May 2022
Veteran fund manager Tim Samway has tipped Australian carbon credits to surge to US$100 ($141) a unit as his cattle station and carbon farming platform Packhorse Pastoral Company acquired its third property and kicked off a $47 million equity-raising to fund further acquisitions.
“Everything that I have read, and in meetings I have held with institutional investors, tells me the carbon price will be $US100 a unit in years to come, not $US30,” Mr Samway, chairman of $10 billion fund manager Hyperion Asset Management, told The Australian Financial Review.
His comments follow the spot price of ACCUs, which nearly tripled last year to a high of $57, crashing 38 per cent in March to just $29 after the federal government relaxed the rules governing its Emissions Reduction Fund, which allowed participants to flood the market with carbon offsets sought by corporate emitters.
Mr Samway also downplayed the furore surrounding Australia’s Clean Energy Regulator after a former high-ranking administrator said 80 per cent of carbon credits it issued were tied to flawed projects that would not remove as much carbon from the environment as promised.
Participants in this program, Mr Samway said, had acted with the best of intentions and had made their “best efforts” in what is an evolving technology. He added that the criticisms have shone “sunlight” on the market and would help make it cheaper and more worthwhile for farmers to participate in the future.
Packhorse aims to create a $1.5 billion portfolio within five years that will double returns to investors through a combination of cattle agistment and by selling carbon credits. Mr Samway said it took its carbon commitments “very seriously”.
“We won’t be taking any chances. We’re measuring sequestration of carbon in real time. Our program is rolled gold,” he said.
Packhorse is also steadily expanding its “grass motel model”, acquiring the 10,029-hectare Moolan Downs Aggregation, an organic beef farm in South East Queensland’s Western Downs. Records show Moolan Downs was acquired from Andrew and Jennifer Youngberry for $42 million.
The deal takes total assets under management to $104 million in less than 12 months after Packhorse acquired 8654-ha Ottley Station near Inverell in northern NSW in January and made its maiden acquisition,8360ha Stuart’s Creek near Roma in SE Queensland last year.
Moolan Downs Aggregation currently runs 5000 backgrounding cattle (animals being fattened before being sent to feedlots) for an offtake partner. Packhorse has a target to increase that to 8000 cattle by 2027.
Alongside its cattle farming potential, more than 90 per cent of Moolan Downs is suitable for soil carbon sequestration, according to consultancy Carbon Link.
“It’s a symbiotic relationship. We utilise the cattle we host to mow, fertilise and produce a seedbed to help embed legumes and other deep-rooted plantings in the earth to increase the microbiome [and sequester carbon], all the while growing higher-yielding protein to help support and secure global food supply,” Packhorse Investments Australia managing director Geoff Murrell said,
Packhorse’s second capital raise of up to $47million will fund the purchase of two properties at Coonamble and Inverell in Central West and Northern NSW.
The latest raise, which is expected to garner support from high net worth investors, family offices and smaller superannuation funds, opens this week and will run until the end of July.
Mr Samway said Packhorse’s environmentally focused property play and the unique way the company maximises returns made it very appealing to investors.
“We sent a team of eight to an agricultural investment conference in New York, where they met with 30 institutional investors. There’s billion of dollars of institutional capital interested in Australian farmland, agriculture and cattle,” he said.
He added that the portfolio was also showing strong capital appreciation in line with the surge occurring across the agricultural real estate sector.
“We issued units at $1 last year. This [capital raise] we are issuing them $1.17, which reflects independents valuations of the portfolio.
“This is a property play for us. It’s about buying well.”