Annual Report - December 2012

The saga of CarbonFix certification of our carbon credits has proved to be our biggest headache this year since we had originally expected it to be completed well before the contractual date of 30th June. In the event, there were delays in submitting the final Project Design Document, due partly to differences between the methodology accepted by Plan Vivo and CarbonFix and partly to issues concerning dual certification with Plan Vivo. The main point of contention has been the calculation of a baseline from which carbon levels are then calculated. In brief, the model used by previous CarbonFix projects has a higher baseline than this e we had used for CDM and Plan Vivo. If adopted this would result in fewer subsequent credits, so it has been a battle worth fighting. In the end both sides agreed that that two alternative scenarios would be submitted to the independent assessor and a decision made after their field visit.

This audit was finally carried out by Rainforest Alliance in the last week of August and, following very positive initial feedback, we were again optimistic that the matter would be concluded by the end of our financial year on 31st October. Unfortunately, we only received the first report in mid-November and inevitably there have been one or two minor correction points to deal with. These have now been addressed but, given the seasonal distractions it looks like we will now be waiting until the New Year. Our German partner, Forest Finance is still very much committed to our cause and only in the last week they have confirmed in writing their commitment and confidence in selling all the available credits within the foreseeable future.

The Share Offer which officially closed on 30th June has once again proved to be very successful adding £392,481 by 31st October and bringing our membership to over 400. We also launched a second Loan Stock offer in February. By the closing date this had attracted £21,000 in new capital. However during our visit in July Sicirec Bolivia informed us that early results from an ongoing review of the status of the tree parcels in preparation for the inspection by Rainforest Alliance indicated that losses from the earliest planting ( 2007 - 2009) were likely to be higher than previously thought. We received the final figures in September and it became clear at that stage that although the society’s own hectares were affected to some extent, the main impact was on the hectares in which some earlier private investors had invested .

As a result we decided to offer all these early investors an opportunity to pool their assets with the society in exchange for shares or loan stock. All these investors had accepted this offer in principle by 31st October, except for the Sicirec Mixfund, from whom we are still awaiting a formal response. We are also still in the process of tidying up some loose ends but essence, this will bring the total issued loan stock under Offer 2 up to £317,586.

Annual Report 2012

It has been an eventful year for the society and the ArBolivia project. The year started with a very success round of fundraising from existing members, which helped bolster our cash reserves in advance of the launch of our 6th Share Offer and 2nd Loan Stock Offer.

In February Sicirec Bolivia started implementing a programme of activities funded by the Dutch NGO Cordaid. This included implementing improvements to the main database, the preparation of a social impact assessment, the provision of a range of specialist tools for tree maintenance, together with training for field staff and farmers and the implementation of an awareness and training programme on fire control.

In July we took our first group of members to Bolivia for an action packed, two week assault on the senses taking in the sights and sounds (and other sensations) of La Paz, Lake Titicaca, Cochabamba and Toro Toro National Park in full festival mode! In between these delights we based ourselves in Buena Vista on the edge of Amboro National Park. We spent a few days at an Ecolodge within the National Park, to experience at first hand the beauty and diversity of the region’s flora and fauna getting down to business with a series of site visits, meeting with 10 separate participating families as well as visiting the office in San Carlos to learn about the monitoring and reporting operations.

There is a new short film now available (on the “news and media” website page , or from me by request) containing interviews with a number of farmers.

We saw at first hand how the project has been developing as a result of the additional funding from various grants. Many new models of complementary planting have now been developed, allowing farmers to continue earning an annual income from an increasing number of cash crops whilst their trees are growing in between. Many of our trees are now at a stage where specialist tools are needed for pruning and maintenance and we saw this in action. One of the most encouraging experiences for me and John was meeting up with families we had met on our first trip in 2010. Of course children have grown - and families too but most heartening was the growth in confidence and optimism.

This also brings our hectare count to 1,130 and means that all the forestry assets, with the exception of those held by the Sicirec Mixfund, will in due course be held under the society’s ownership. This will simplify the administration and reporting requirements as well as presenting a much clearer picture to potential investors in the ArBolivia project for the future.

Early in the year Sicirec Bolivia received a further grant from Cordaid to improve the quality of the ArBolivia database and its reporting on the social impacts of the project. These improvements now give us a more accurate record of the state of our timber parcels and enable Sicirec Bolivia to provide more comprehensive and accessible data to our project partners.

In June we agreed with Sicirec Bolivia to bring forward our monthly payments in order to provide extra cashflow to buy a portable sawmill. This will in due course enable us to harvest and process our farmers’ timber more cost-effectively than using conventional local facilities. In the meantime the new sawmill team has been honing its skills on private contracts, including some of the plantations established as part of the FAO pilot project.

In the last few weeks Sicirec Bolivia has received confirmation of substantial grant funding for the period 2013 - 2016. The first amount of about 75,000 Euros a year for the next 4 years from the Hanns Seidel foundation will provide resources to develop activities in promotion, marketing, capacity building, education and training for 400 smallholder families. The second amount of over 100,000 Euros from the IUCN (International Union for Conservation of Nature) is for the establishment of a conservation area north east of Santa Cruz, called la Chiquitania.

I have spent the last week or so trying to establish a picture of our prospects for carbon credit sales in the year ahead. We have had very positive reassurances from our current partners, with Forest Finance keen to start selling to its waiting list of customers, Zero Mission in Sweden has completed its commitment for 2012 on target and has signalled higher demand for 2013 and Face the Future has said that it is eager to conclude a distribution agreement “by the end of January”.

The trip proved to be a truly memorable experience for all our members and has established firm new friendships. For myself and John it was most gratifying to see how enthused all our members were with the way the project is being managed on the ground. This has given us renewed determination and confidence that we are definitely on the right track and on the verge of achieving something really special.

Perhaps inevitably, just when our optimism was at its highest, we learned in the Autumn that Sicirec Bolivia had unfortunately had to revise its early timber revenue forecasts downward. The decision by the Bolivian government to source concrete rather than wooden telegraph poles for its telecommunications programme has unfortunately removed the main intended market for our early timber. Sicirec Bolivia has been working to find alternative markets that will allow us to sell this timber at a similar premium but in the meantime we must anticipate much lower prices. We should stress that the outlook for our mature timber remains very positive and the overall impact, assuming we can ride the short term cashflow issue, will not be great.

In late September however we were given a nicer surprise when we learned that CarbonFix had been acquired by Gold Standard, with a view to launching a new Forestry and Land Use model in 2013. The broad consensus is that this will give a significant boost to our prospects for selling our carbon credits

Having taken stock of these developments we took a decision to commit to the planting of 200 hectares in the new season starting in December, so that we will have just enough time for these new trees to provide their first revenues in 2019, when our loan stock is due to mature. We also feel that , given the consistency of our fundraising success to date, we should build on this rather than reduce our efforts in future years as originally planned. If we are able to maintain current levels of funding for the next 6 years we can more than double the current scope of the project.

Sicirec Bolivia has also been successful in developing its own commercial services, concluding its first independent harvesting contract for Serebo (left) with CIMAL, one of Bolivia’s largest timber companies.

Serebo is also one of the species grown by our farmers so we are interested to see the final sales figures. We are also hoping that a successful outcome will enable Sicirec to apply for trade finance to purchase more specialist equipment to develop these services in 2013.

We have already released some initial funds for Sicirec Bolivia to start its planting programme for 200 hectares in the current season. This will make up for the losses suffered to date - but this time solely for our own benefit and only with farmers who have already proved their commitment and competence. Assuming our fundraising meets our target , we will be maintaining our current investment level in July rather than decreasing it as scheduled under the original agreement. This will then allow Sicirec Bolivia to prepare for further planting this time next year.

In summary, despite some ongoing frustrations, we are very close to making some very significant breakthroughs in 2013. We need to make another push for investment at the start of the year in order to bolster reserves again. However, once we finally conclude our CarbonFix certification, we will be able start making progress on several fronts. We are also looking forward to the results of this year’s harvesting trials which should be known very shortly and then to some substantial revenues from the first commercial thinnings from our own hectares.

Investors Trip 2013

Following the success of the first members’ visit this year we are now looking to run another visit for prospective investors in 2013.

If you are interested in joining a trip in the summer, 2013 please let me know as soon as possible so that we can start to plan an itinerary.

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We will also be developing a number of initiatives around our “Climate Action Plan”.

We have recently signed an agreement Tree Nation to add our trees to their “Plant A Tree” donation platform. Although the retail sales platform is the most visual element of its service, the real attraction is from it’s corporate activities promoting the project behind the scenes. (Seewww.tree-nation.com)