Bid for funding rejected

The Government has been accused of abandoning the wool industry, after rejecting Wool Equities' $10 million partnership proposal to build a new textiles industry.

Wool Equities Ltd (WEL) applied to the Government's primary growth partnership scheme to fund a high-quality wool venture making products such as carpets and blankets, but was turned down late last month.

On Tuesday, WEL chairman Clifford Heath said six wool industry partners had signed up to the proposal, from farmers to carpet producers, but without government support the deal collapsed. "It was a dismissal," he said.

"Within the Government circles wool has been written off."

Under the proposal, WEL would have matched a $500,000 start-up put forward by the Government. Later funds of up to $10m would have come from WEL's industry partners and the Government, he said.

The funding rejection comes in the same month the Wool Research Organisation failed to secure $1.5m of government funding It also follows farmers voting against the wool levy in the Meat & Wool New Zealand referendum in August, sucking more than $10m out of wool research.

The Agriculture and Forestry Ministry would not comment on individual funding plans, but rejected the suggestion that the Government had written off wool. The ministry was providing the wool industry with "practical support and funding", it said.

Heath said the rejection of WEL's proposal was a disappointing blow for the biotechnology firm. With only $2.5m in cash and no real assets, WEL needed to leverage off any funding partnership it can to start generating much-needed returns.

"We need to have a business proposal that can produce cashflow within three to five months." With less funding, WEL will now try a similar project on a less ambitious level. Talks were also continuing with some industry partners to produce high-quality wool carpets for the North American market, he said.

WEL has had a turbulent 2009, with the previous board ousted in September by the Wool Advancement Group, which had been pushing for a direction change.

In a meeting in November, Heath said the previous board had wasted $23m of cash and assets in a "pursuit for El Dorado".

WEL also appointed a new director, Peter McPartlin, on December 10. He had been tasked with inspecting the previous board's accounts, Heath said. "We are looking at why the company got to where it is, and ensure that all is fair and reasonable."

The last annual report ended June 30 showed a loss of $3.53m, after a loss of $4.53m the previous year.

- © Fairfax NZ News