Kiland was previously known as Kangaroo Island Plantation Timber. The company owns 18,600 hectares of land on Kangaroo Island, Australia’s third largest island located off the coast of South Australia.

The plan was to grow timber on the island for woodchipping. Alongside this the company was developing a deep water wharf to facilitate cargo being shipped to the mainland.

Things did not go to plan. At the beginning of 2020 bushfires decimated the eucalyptus plantation. In August 2021 the application to develop the seaport was declined by the state government. The company renamed itself to Kiland and focused on reverting the forestry land to pasture for agricultural use. The forestry assets were written off.

Since then the company has raised capital to pursue a plan to convert the fire damaged trees into carbon capture credits. 

According to the companies presentation: 

Biochar is a charcoal-like substance produced by heating organic matter without oxygen in a process called pyrolysis. Pyrolysis doesn’t produce carbon dioxide as ordinary, oxygen-fuelled fire does. Instead, the carbon gets locked as charcoal-like matter.

If the trees are left as they are carbon is released as the wood rots. Instead, converting them to biochar and sequestering (i.e. burying) it will lock away the carbon.

The company estimates it has 4.5 million tonnes of fire damaged biomass, which will convert to 0.95m tonnes of biochar, resulting in 2 million carbon removal credits over a period of 10 years or more. The company expects to deploy pyrolysis kilns in place so biochar is produced on site. 

The spot price for a carbon removal credit is currently around EUR111. US$22 product cost per CRC, and 20% of revenue paid to project partners.

Assuming a CRC is sold for USD 110 (~EUR100), less costs and rev share, it is about USD 70 revenue per CRC. Company estimates 233,972 CRCs produced annually, roughly USD 16.4 million / year (AUD 24 million / year) with those figures.

There is also the possibility that some biochar will be sold for agricultural use, such as soil conditioning. This attracts a higher price is the US but unclear what demand exists in Australia.

The company currently has a market cap of $144 million. Land holdings are valued at $72 million and $48 million cash as of 31 Dec 2022.

Just some initial notes. Don't currently hold.

09-Feb-2020:  On 31-Jan-2020, KPT requested an extension of their voluntary suspension from trading  until the Company is able to inform the market on:

1. The insurance settlement pertaining to the fire damage; and
2. The financial impact and effect on operations to the Company due to the fire damage.

The Company advised that during this extended time:

(1)  It will continue to complete the following tasks, which it believes must be undertaken in order to ensure an orderly market in its securities.

• to assess the extent and severity of damage to its timber plantations and those of independent tree growers;
• to investigate opportunities to sell fire-affected timber;
• to make any necessary changes to its arrangements with its insurers, bankers and project partners;
• to determine its future business strategy and the extent of planned replanting activity; and
• to determine the extent of fire-related impairments to the carrying value of its land and timber assets.

(2)  In addition, the Company will use the extended time:

• to mitigate risks for the rest of the fire season and future fire seasons;
• to assist the Kangaroo Island community and independent timber growers;
• to work with government and the community on the economic recovery of the Island economy; and
• to make progress towards a favourable conclusion of the development assessment process for the KI Seaport, which remains critical to the Company’s medium and long term future.

They have released a number of updates regarding damage estimates to date (~90% of their KI timber plantations have been severely fire-affected) - which can be accessed from here:

https://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=KPT&timeframe=D&period=M6

It's clear that KPT, when they do resume trading, will open substantially lower than the $1.96 that they last traded at before being suspended.  They do have insurance, but it won't cover everything.  And they still don't have permission to build the deepwater seaport near Emu Bay that is central to their business plan.  Some would argue that the devastating and unwelcome severe fire damage across much of Kangaroo Island (KI) that has destroyed around 90% of KPT's timber (using their own preliminary estimates) perhaps weakens their case rather than strengthens it, particularly when you consider that they will now need to clear all of that land and replant it with new seedlings, so the business case is arguably less pressing now.  

I'm not a shareholder in KPT, but I do support what they are trying to do.  I think that an export seaport would boost industry in general, create further employment, particularly in the forestry industry, and that sustainable plantation forestry could be an important future industry for an island that needs all the help it can get, now more than ever. 

If KPT gets smashed down to rediculous levels when they recommence trading they might be worth a good look.  They would certainly not be without significant risk, and are certainly right up there at the speculative end of the spectrum, but worth a look nonetheless.  Doesn't mean I'll necessarily buy KPT shares, but they're on my watchlist.

Further Reading:  KPT is the 6th largest holding in Tony Hansen's EGP Capital's "Concentrated Value Fund" (EGPCVF) now (or as at Jan 31), having been the fund's 4th largest position at Dec 31, and their 3rd largest at Nov 30, 2019.  The reason they've dropped to #6 in Jan is that Tony has marked the stock value down to $1.50 per share, saying on page 1 of his EGPCVF January 2020 Report, "We think there’s a good chance the shares will trade lower than that at least initially when the stock resumes trading but given the significant insurance payments the company will be due, the considerable land value and the generally decent survival rates of fire-affected E. Globulus, we think there’s a reasonable chance the price will settle around that level."

Reading through recent KPT announcements, including their December Quarterly Report which was released on 31-Jan-20, it appears that the survival rates are a lot lower when the tops of the trees (the canopy) is destroyed by fire (rather than realtively minor ground fires) and KPT's initial damage estimate of 90% does appear to refer to trees with significant canopy/crown damage, so it does seem quite likely to me at this early stage that around 90% of KPT's trees will need to be felled and replanted from seedlings.  Some of those trees will have some salvage value, but they won't be able to be left to grow on from here.  Let's hope that the salvage value exceeds the costs associated with the felling, clearing, and replanting that will be necessary, or if not, that the insurance payouts cover most if not all of the difference.  Time will tell.

AFR article on KPT's exposure to fires (click here)

Two key quotes from the CEO:

"It's well in excess of $100 million of tree crop that has been impacted"

and

"We are 100 per cent confident that the business will carry on," he said. "We have insurance and also Kangaroo Island, not withstanding the recent events, is a terrific place to grow trees."