JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD debate -
Wednesday, 26 May 2010

Operational Matters: Discussion with Coillte

Chairman

On behalf of the committee I welcome representatives from Coillte, Mr. David Gunning, chief executive, and Mr. Gerry Egan, group director, strategy and corporate affairs. The organisation was invited to respond to issues we wanted to raise after the committee expressed concerns on foot of a meeting with representatives of the Irish Forestry Contractors Association who appeared before it on 14 April.

Before I call on the delegation to make an opening statement, Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House, or an official by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009 witnesses are protected by absolute privilege in respect of the evidence they give this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House or a person outside the House or an official by name or in such a way as to make him or her identifiable.

Deputy Seán Sherlock

I anticipate that there will be a presentation but I think we have already had it. A list of the issues raised was furnished to Mr. Gunning and Mr. Egan. I would like the committee to go straight to those issues instead of revisiting what was already said about Coillte's operations and the results for 2009. It would make best use of our time to go to the issues if that is possible; there are at least nine that require answers.

Deputy Christy O’Sullivan

I raised an issue that was supposed to be on the list but I do not see it. It related to amenities on Coillte lands.

Chairman

They were agreed by the committee on the day, although I was not here that day. The Deputy can raise the issue, it is not a problem. Is that acceptable to the delegates?

Mr. David Gunning

It certainly was our intention to deal with each and every one of the issues. We also wanted to use this opportunity, following the recent announcement of our results for 2009, to bring the committee up to date on them and, as we go through this, to identify and pick up the issues that have already been flagged.

Deputy Seán Sherlock

Respectfully, I ask that we do as I suggested and that we go straight to the issues, adopting our normal format where any questions from spokespersons and then other members are addressed.

Mr. David Gunning

That is perfectly fine with us.

Deputy Seán Sherlock

We should go straight to the questions. Any of the issues before us on the submissions on figures will come out as the questions are answered.

Mr. David Gunning

We are happy to deal with the questions no matter how the committee deems it appropriate.

Deputy Michael Creed

I am not sure of the date on which Mr. Gunning and his colleagues were last here but shortly afterwards we were in the Dáil to approve a loan facility of €400 million under specific legislation. When Mr. Gunning appeared previously, there was a detailed debate about the financial results for 2008. While we were discussing them, it transpires there was ongoing communication between Coillte and the Department about its borrowing requirement. I would have thought, as the committee that Coillte should report to, that it would be appropriate to put us in the picture on this matter. I was stunned that we were effectively locked out of the issue until we were presented with a fait accompli. Why did that happen? Why were we not told about this when we considered the same issues during Coillte’s last visit to the committee?

Deputy Seán Sherlock

I thank Mr. Gunning and Mr. Egan for coming before the committee a relatively short time after their last submission. Since then, the €400 million facility was agreed by way of legislation at Christmas and the Irish Forestry Contractors Association has appeared before the committee. There is an inherent respect for the work Coillte does, it is seen as a vital resource, but there are issues where questions can be asked, particularly about the structure for the €400 million.

On the designation of Coillte, what is the exact structure? Is it a semi-State company, a State company or a private company? What Department is it vested in and which Minister does it answer to? What is its exact designation as a company? Why did the chief executive request a €400 million credit facility for financial restructuring? Is it because loans outstanding had to be restructured or because there are short-falls in financing arrangements? Is there a shortfall in pension provision or is the company in financial difficulty? We have seen the 2008 and 2009 reports and the picture for 2009 is not what the body would like it to be. What is the extent of the difficulties?

The Irish Forestry Contractors Association appeared before us and made some serious allegations concerning the standing sales. Mr. Christy Nolan, who appeared before us on 14 April, said that in regard to the 2010 ratio of standing sales, Coillte wants to take over most of those sales and is only putting up 40% of timber for standing sales to the mills contractors and that it is taking over more of the harvesting sales, which amounts to approximately 53%. He stated that this will force the mill contractors to tender against Coillte contractors, who are already in dire straits. He claimed to have been informed by the mills that Coillte has taken up to 100,000 cubic metres off the system for optimisation, which he believes is another means of getting control of more of the harvesting on its conditions. I am not saying I agree with that but I would like to see that allegation answered by Coillte. We want to get a true picture of where the issue of standing sales stands at present.

There is a perception that has been expressed to us that there is depletion of long-standing staff in favour of sub-contractors. There is a perception that contractors do not have a stake in forestry management in the same way as the existing staff and, through the depletion in numbers there has been a diminution in the standards in terms of replanting, thinning and other issues. As somebody who knows very little about forestry, I have to say that when I walk in the Ballyhouras I get a sense of depletion and that replanting is not as vigorous as it might have been. I do not know if that is the case or reflects the rest of the country but I would like to see the point answered.

The question was also raised by Mr. Nolan about Coillte's diversification into other products and markets. I, for one, would stand behind any company that seeks to diversify into as broad a range of areas as possible. It is a good and healthy way to do business. However, the idea of Coillte, which is a forestry company, diversifying into nursing homes warrants some degree of questioning. Whether Coillte is seeking to do this to avail of tax incentives or has a clear objective to seek a return from this type of activity is open to question. However, the perception is that there has been diversification into such a wide range of areas that it is to the detriment of the core business, and that should be addressed. These are the issues we wanted to raise and which we wanted to give Coillte an opportunity to address.

Deputy Martin Ferris

I take it the delegates have in front of them the list of nine questions. I wish to add one question on a safety matter, which I have been dealing with for the past two weeks. It is with regard to fires in Coillte forestry. Many locals argue there is a lack of adequate firewalls between the forestry and homes. In particular I am speaking about areas such as Lyreacrompane and Rathille, areas of bogland and where growth has been burned off. This has an effect in perhaps starting fires in the forestry and so on. I am not satisfied with the safety measures in place. The regulation is for forestry to be 60 m from a house, plus a firewall. Many people build single rural cottages in the middle of nowhere and it is quite difficult to raise an alarm if anything happens.

Deputy Christy O’Sullivan

Deputy Sherlock asked a question on the status of Coillte. He also asked about the reduction in the number of permanent staff, which I do not see as a bad thing because we get better value from contracting private people. I am not concerned about that. However, I am very concerned about dumping on Coillte lands and Coillte will have to take responsibility for dealing with this. I suggest employing a person from the area who would have real knowledge of the area and who would police forests on a regular basis. That person might be in a position to catch somebody in the act of dumping. Coillte should consider this. Forestry is a valid commodity and should be policed properly.

Coillte has a huge part to play throughout Ireland with regard to forest amenities, such as for walking and horse riding. What system does Coillte have in place to roll out amenities? There are roadways and pathways through much forestry. Who deals with people who approach Coillte to state that they want to be able to ride horses through the forests or want to have a cycle path? What criteria are in place to be able to facilitate these activities?

Deputy P. J. Sheehan

I welcome Mr. David Gunning and Mr. Gerry Egan. Quite a number of issues have come to light since the previous occasion on which the gentlemen appeared before the committee. We have a list of nine issues, but what is most alarming is that we do not seem to be keeping up our tempo as far as the planting of forests is concerned. I am not too happy. The forestry sector will not achieve its critical mass, which was defined in the 1996 forest strategy, Growing for the Future, at 17% forest cover, or 1.2 million hectares planted. Forest cover in Ireland is at only approximately 10%. We are still lagging behind as far as forestry production is concerned.

The targets in the White Paper on renewable energy will not be achieved with regard to wind energy biomass, of which forestry is our largest resource and offers the greatest potential. Investment in biomass technologies will be ludicrous if there is not a sustainable supply of wood biomass. The Kyoto Protocol targets will not be achieved. Forests will become a carbon source, adding to the Government's climate change liabilities. I am afraid the emphasis in Coillte is to find an easy way out from our natural resources in forestry. We have beautiful climatic conditions here for exploiting our forestry production. Alas, we are only nipping at the bottom as far as the development of our lands is concerned. I understand the State has a considerable amount of land.

What directed Coillte to diversify its strategy on the planting process and to go into applications for nursing homes? Applications have been made for nursing home developments in Westport, County Mayo; Carrick, County Wexford; Castlemartyr, County Cork; Carrabane, County Galway; and Quin, County Clare. Coillte is a commercial company operating in forestry land based businesses, renewable energy and panel products. It also markets wood panel products and the construction industry. However, the move into nursing home development is a new departure for the company, which has been badly hit by the economic downturn. Do I take it that Coillte's move into nursing home projects is a way to avail of a tax break? If one has not submitted an application before 31 December 2009, one would not be eligible for the tax breaks applicable to nursing homes. What expertise does Coillte have in running nursing homes? Are we throwing away the crown jewels as far as this country's development is concerned? The energies of Coillte should have been solely directed towards the expansion of forestry production and the creation of jobs from it. I do not like to see a State company such as Coillte fragmented in such an area as it will probably lose control and will eventually be purchased by an international conglomerate which will take it over as a going concern. The future is in our timber production and we have not addressed that.

I draw the attention of the committee to the fact that it is not too long ago since we discussed an e-mail sent to every member of the committee pointing out the anomalies of Coillte. It stated that if logs were removed from the forest today for delivery to Grainger Sawmills in Enniskeen near my part of the country they would be measured in accordance with standard procedures for the measurement of round timber prior to being converted from green tonnes to volume. The e-mail suggested that it is practically certain that the measurement and conversion process will work out a rate of 1:1:3 to determine payment for log by Grainger Sawmills to Coillte. However, the logs are not weighed by Coillte when they are delivered to the Coillte-owned timber processing mills in Clonmel or Bellview in Waterford. Much lower conversion rates are being applied by Coillte to determine payment to people such as Mr. Nolan and Mr. Ryan who sent us the e-mail.

Chairman

They have received plenty of e-mails.

Deputy P. J. Sheehan

It has resulted in a loss of income to all concerned. Do we have one law for one section of the community and a second law for another? Does this put Grainger Sawmills, which is one of the best and most productive timber outlets in the country, at a disadvantage? How long more will Coillte jump from one project to another, trying to safeguard millions of euro? As the Chairman knows----

Chairman

Do not start reading again, please.

Deputy P. J. Sheehan

As a spokesperson on forestry, these are points that I would like to make sure we clarify. When I am asked by people in my constituency what the national forestry policy is, I say we have no national policy on forestry. We seem to have created a national company, Coillte, but unfortunately it has not delivered the goods in the right direction.

Deputy Denis Naughten

I thank the Chairman for the opportunity to question Mr. Gunning and Mr. Egan today. I am not a member of the committee but Coillte has a significant amount of property in my constituency and, naturally, I have a vested interest in that. I want to return to something about which Deputy O'Sullivan spoke, namely, Coillte's assets, how it is utilising them and the public amenities it has. One of finest examples of the public amenities under its ownership is Lough Key Forest and Activity Park in Boyle, which is a fabulous public amenity. In Coillte's powerpoint presentation, the last word in the third last point is the word "recreation". It seems to have gone down the list of priorities, as far as Coillte is concerned. The focus seems to be very much on the commercial aspect of the company and does not examine the huge potential we have regarding tourism.

The issue of illegal dumping is of concern to Coillte. It might outline what steps it is taking to try to curb that problem and what, if anything, the company is doing to try to promote its assets, in terms of tourism and recreational development, such as Lough Key Forest and Activity Park.

Another public amenity I wish to raise is Slieve Bawn which is also in Roscommon. Coillte is now examining sweating that asset with the development of up to 25 wind turbines in Slieve Bawn. Coillte should examine sweating its assets. I fully support renewable energy projects. However, I have a problem with that asset as it is one of the most exposed sites in the midlands. One can see 14 different counties and the four provinces of the country from the top of Slieve Bawn. The Chairman's constituency can also be seen. I have serious reservations on why that site is being examined by Coillte. The delegates can revert to me as they may not have the details available. From scenic, visibility and environmental perspectives there are serious concerns about that site, leaving aside the safety issues which have been raised locally. What is the logic behind it? If one is building on such an exposed site, the turbines have be turned off for a significant period. Would it not be better to examine some of the other developments which are considerably less exposed and visually obtrusive sites? Has Coillte examined the possibly of developing those sites or has it only examined Slieve Bawn because of the electricity infrastructure in place? It is forcing the company to consider that. If electricity infrastructure was rolled out it may not consider that site.

Will the delegates elaborate on Coillte's policy on wind turbines and the Slieve Bawn site, and on what is happening with promotion and development of Lough Key and illegal dumping?

Deputy Mattie McGrath

I also welcome the delegates, and thank them for appearing for the committee and making their presentation. On governance structures, I have a serious problem with the reduction in the staff quota. I have no problem with subcontractors. On basic, everyday maintenance, I remember as a lad going to school observing teams of men in every village cycling to their work in forests. They did a lot of ground-breaking work at the time. They worked very hard in all weathers, planting trees and maintaining entrances and fences. The environment was a credit to them and they had pride in their work. Now that pride seems to be gone. There is often only one man to cover half a province and look after forests, which cannot be done with a mobile telephone.

There is no local involvement or proper maintenance. All the fences and stiles have fallen down or are rusted and broken. There is a bad relationship between farmers, sheep farmers in particular, and Coillte and that is a pity. I am a member of the Sheep Breeders Association in south Tipperary. The sheep farmers feel that a quick fix fence is put up to protect young planting, but as soon as it is established they do not care what sheep go into it and the same with the deer coming out.

I compliment Coillte on the construction of roads. It constructs better roads than the county councils. I often said at council meetings that the council could take a leaf out of Coillte's book in regard to drainage and so on. Drainage is the biggest issue. Coillte has much poor ground but it does a tremendous job draining it. It is easy to maintain because it is drained properly. Although it is perhaps inadvertent, where drains are old and following clear-felling, much damage is done to roads. Coillte should watch out for that when clear-felling. If a drain is broken, untold damage is done to roads.

Coillte has been involved in some community and voluntary schemes in conjunction with farmers and county councils, which I welcome. I also welcome the funding Coillte provides for roads when it removes timber from an area.

On the issue of unfair trading in regard to private sawmills, that does not seem to be fair. I refer to forestry management and dumping. Coillte is not responsible for dumping but unscrupulous and reckless people are. It is an awful blight on the landscape. Coillte incurs huge cost removing dumped cars and it has had to put up bollards to prevent people gaining access to forests in cars. It is typical of what is happening in the country and it is a pity. Coillte will have to be more progressive in that regard. It will have to use the local eyes and ears. If local farmers do not co-operate, Coillte has no support. It needs community support.

On access to Coillte forests and public amenities, there is huge scope here for further development in partnership with others. I have seen cases where permission for a cycle track has taken a couple of years. Public amenities could be developed. Once one goes into a forest, one has peace and solitude. However, why does Coillte not leave a buffer zone between the road on a scenic drive and where it is clear-felling? It looks terrible if that is not done? It has committed to leaving a line of trees but often they are cut down.

I have some difficulty in regard to fairness in selling sites or land. Some people cannot seem to get the sites they want in a local area or an access road. Is there a level playing field for everyone?

I refer to the explanation about the money. I do not want to be personal but I would like to ask about the salary scales of senior people in the organisation. I believe they are too high.

Mr. David Gunning

That was an impressive set of questions.

Deputy Michael Creed

That is only the start.

Mr. David Gunning

We will attempt to deal with each one. I would like a minute or two to set the scene also. The disastrous situation in the construction market in 2008 and 2009 will be no secret to people in this room. Coillte has been providing products, directly or indirectly, into that sector. The demand for sawn timber in Ireland fell from its peak at approximately 1.8 million cu. m to fewer than 500,000 to 600,000 cu. m. The current demand is less than one third of what it was at the peak.

I am very proud to say that despite that downturn, we have managed to keep the forestry sector in Ireland — from the forest to the sawmill sector to the users to the export of that timber — working through this difficult downturn. The majority of Irish sawmills were on a two or three day week this time last year. Now each of them — Deputy Sheehan mentioned one in Cork — is on full production. That is a positive story in itself.

Coillte owned manufacturing plants, including that at Deputy McGrath's backdoor, Medite in Clonmel, and SmartPly OSB in Kilkenny. They have sold their product up to early July. Again, it is very heavily export oriented. The UK is a significant market for us. While we see some fragile signs of recovery, we would have to be concerned about recent announcements about £6.5 billion coming out of that economy and what impact it might have. Nonetheless, this is a significant business and we are running it in somewhat difficult times.

We are delivering approximately 100 truck loads of Irish timber every day to the ports on the eastern side of the country for export. We are selling high end products for construction internationally — not only in the UK, but in France, the Benelux countries and parts of the Nordic sector.

In 2009, Coillte spent €132 million in Ireland on goods and services. What is interesting about Coillte is that a significant chunk of that was spent in areas in which other companies do not operate, that is, in the rural part of this country. Of that €132 million, €40 million was spent on our very accomplished and important contractor base.

It is in that context I want to deal with some of the issues raised. Coillte employs 1,036 people. Approximately, 150 are employed in Medite and 150 in SmartPly. The Coillte forest — the legacy business — has 520 employees and the remainder are employed in various sales and marketing activities. We made significant progress in running our business, delivering value to our shareholder and, in this current economic climate, providing a significant amount of employment right through all the aspects of this forest logistics challenge. From forest gate to harvesting contractors to haulage to road building to forest maintenance, it is a significant spend on Coillte's part and we are committed to it.

We have 6,500 properties in every county and we take our responsibility as a neighbour of practically every parish very seriously. Whether it is a farmer, a householder or, as Deputy Ferris mentioned, a cottage, we engage in a very aggressive way with them. We talk to our neighbours, whether in regard to a land sale, felling activities or bringing timber on a road in south Tipperary or wherever. These people are informed of these operations, as are the local authorities. For example, in regard to roads, we agree the haul routes with the local authorities, we agree the loading limits and various other things and we deal with those issues. I say that as a general way to frame the economic challenge we are currently confronted with and how we are responding to it.

Until December of last year, Coillte's borrowing limit was the same as was put in the statute when Coillte was founded under the Forestry Act 1988. I joined this company in 2006 and since 2002 there has been ongoing dialogue with the various Departments to which Coillte reported during that period, whether the Department of Communications, Energy and Natural Resources or the Department Agriculture, Fisheries and Food. I ask members to forgive us for that oversight in that we have been having this dialogue with our shareholder for almost eight years. It is important to understand the statutory borrowing limit. I will ask Mr. Gerry Egan, the company secretary, to deal with the structure of those matters.

Deputy Seán Sherlock

With all due respect, the reason for the legislation and the technical issues around that are understood, that is, the fact that Coillte had to come back on an annual basis and seek the requirement. At issue here is the use to which the borrowing requirement is being put, transparency in regard to why a requirement of €400 million is being sought and how that translates into pounds, shillings and pence in substantive terms.

Mr. Gerry Egan

The first part of my reply addressed Deputy Creed's question on protocol and the committee not being informed or discussing the matter on the last occasion. I will preface my comments on the borrowing limit by dealing with Deputy Sherlock's question on Coillte's legal status because this is a significant issue in the context of the legislative changes taking place. Coillte is a 100% State-owned company. The Minister for Agriculture, Fisheries and Food owns one share in the company and the Minister for Finance owns the remaining shares. Coillte's legal status as a private limited company occasionally gives rise to confusion because people falsely assume this entails a degree of private ownership. A distinction can be made between our legal status as a private limited company, that is, a company which is not listed on the Stock Exchange, and the company's ownership by the aforementioned Ministers.

When Coillte was established in 1988, it was given a borrowing limit of €101 million and the legislation also provided for further temporary borrowing. As that limit was never increased over the ensuing 20 years even though we have sought to increase it since 2002 or 2004, we found ourselves with borrowings in the order of €170 million by the middle of last year. The statutory limit covered €101 million of this amount, while a temporary limit covered the remainder. By its nature, the latter should be considered temporary rather than the basis on which a company finances its business. We needed to re-finance the group's debt but in the new governance environment several banks have difficulties with doing this on the basis of a temporary borrowing limit. This is the reason it was necessary to bring forward legislation.

In regard to the necessity of the limit, Coillte's debt stands at approximately €180 million today. We have capped it at around that level for a while. We sought a €400 million limit so that it would be high enough to enable us to put in place facilities for the next three years and allow for a degree of future proofing on the basis that it has been 20 years since the primary legislation was last changed. If we are to avoid having to repeatedly return to the Oireachtas to change the limit, we will need a degree of future proofing. It is a limit rather than a facility and we envisage that our borrowings will decrease in the current year. It is not our intention to increase Coillte's debt from €180 million to €400 million.

The €180 million is used to fund day-to-day operations. We are spending €50 million annually on the capital investment programme. Coillte's debt increased significantly after its purchase in 2006 of the Medite business in Clonmel. Our borrowings increased by approximately €70 million during that period. We may have further borrowing requirements on foot of the investments to which Deputy Naughten and others referred but we are very focused at present on maintaining our debt at its current level and reducing it in the future.

Deputy Seán Sherlock

Does Mr. Egan not think Coillte was ill-advised on the Medite acquisition or that it took a short-term view of the matter given the borrowing requirement of €70 million? It appears to me the banks dictated that debt restructuring would not take place until they were satisfied that the company had an extended borrowing facility. What banks were involved and what was the nature of the deliberations? We have entered a new era of transparency in terms of the link between the banking sector and State companies. If a State-owned company like Coillte seeks an extension to its borrowing requirement, we would like to know more about the nature of its relationship with the banks.

Mr. David Gunning

It is important to understand the systemic nature of Medite as an Irish timber business. Coillte grows and is a primary supplier of a large volume of standing, harvested, roadside and various other saw logs used in construction applications. Our thinnings and treetops are sold to companies such as SmartPly to make oriented strand board, a value added product of which 85% is exported. We sell a significant volume of material to sawmills, which use the middle rectangle of the log. The remaining pieces, including the bark, fall off and are used in other applications. It is critically important that we have an economic outlet for these residues. Medite purchases residues from sawmills, breaks them into small chips and wood fibre and, through the addition of resin, turns them into medium density fibre board. This is a fantastic product which is increasingly used worldwide in buildings and furniture.

This flow is important because it allows for the stacking of timber value. Significant amounts of the highest value product, construction timber, is now being exported thanks to the joint efforts of Coillte and our sawmill customers in targeting the UK market, with the support of Enterprise Ireland. The middle size of timber is used for pallet and fencing applications. These are lower value but nonetheless important applications because many of the goods shipped out of Ireland, such as electronic goods, engines and farm products, are packed in wooden crates made from this type of timber. At the lower end of our products is pulp, which comprises forest thinnings and treetops. Pulp has potential value in bio-mass applications and we think we can add further value with oriented strand board. This material is also used by Masonite in County Leitrim and Finsa in Scarriff, County Clare.

Coillte, the sawmills and the processing sector are all part of a large system that makes use of forestry material. When Medite was put up for sale by its third US parent since 1983, we believed it was of such systemic importance to the Irish forestry sector that we needed to own it. We did not simply pick a number in regard to its worth. Considerable research and effort was undertaken before we negotiated the final figure of around €67.5 million. In its first year of operation, Medite made profits of €27 million. Coillte is absolutely convinced about this issue and the importance of taking a broad rather than narrow industry view.

An important issue to arise in the past week was an announcement by the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, of a new Government support price for bio-energy. While Coillte has not yet completed its analysis of the Minister's announcement, essentially it means Government subsidies will be paid to burn bio-energy material. Since 1996, we have been operating SmartPly without subsidies, providing employment and delivering a value added export product. I am merely highlighting this issue. Coillte needs to continue its analysis to assess what impact the Minister's announcement will have on our processing operations. We believe that it could be significant. I hope I have addressed the Medite issue.

Coillte is focused on four key businesses. The first is forestry, the business in which we started. Second, we are focused on those parts of the 7% of the land area we own on behalf of the State that are not forest because they present some value opportunities. Our third focus is our panel products which, as I pointed out, are an integral part of the Irish forestry sector. The fourth area is our interest in renewable energy. All these areas are interrelated.

Coillte is not involved, nor will it ever become involved, in the operation of nursing homes. Since its foundation, however, the company has enjoyed a good record of adding value to the land asset in its possession. Nursing homes are another good example of increasing the value of Coillte land. By submitting applications before the end of December, the land values are further enhanced because of the tax treatment of these types of investments once we sell them on to the eventual operator of the nursing homes. I do not want to receive further e-mails from people seeking places in nursing homes because Coillte will not become involved in the business.

Deputy Michael Creed

Perhaps it will become involved in retirement homes.

Mr. David Gunning

On the general issue of our businesses, I referred to forests, land, panel products and renewable energy. All these areas are related to the asset Coillte owns and manages on behalf of the State. The company is not an energy supply company like the ESB or Bord Gáis. Although we do not want to compete in this area, we have some outstanding assets owing to the nature of the land we own, for example, the altitude of some of it. Through the approvals of the Commission for Energy Regulation we have ten excellent projects in nine counties. This figure does not include the Sliabh Bawn project, which has not yet completed the process.

Coillte has a significant role to play in helping to State meet the challenge of delivering 20% of its energy from renewable resources. The company can also make some money in doing so. Coillte has excellent relationships with Airtricity, now known as Scottish and Southern Renewables, Hibernian Windpower, Viridian and what was SouthWestern in Cork, in developing wind farms. We are examining a number of projects. Nine turbines have been erected at the first wind farm being developed by Coillte, Garvagh Glebe in County Leitrim. The site was today connected to the grid into which it is pumping power. Once completed, we will provide power for approximately 13,000 homes. Wind farms are an important part of our operations.

In terms of identifying sites, the issue raised by Deputy Naughten, we commissioned ESBI Consultants to do a significant study of the suitability of all of Coillte's land assets for wind farm development. This resulted in a long list which we filed down to a shorter list of the highest priority sites. These sites were chosen on the basis of access, proximity to the grid and, most important, a supportive and excellent wind regime. In the areas where we are developing sites Coillte is engaged in dialogue. We will continue to communicate with people in Sliabh Bawn, as we do in every development or land sale in which we are involved.

It is important in these business areas not to ignore the issue of amenity and recreation space. I would not like the impression to be given, either at this meeting or as a result of comments made by Olivia O'Leary yesterday, that Coillte does not provide an excellent recreation resource to people free of charge. According to the latest report, we have between 18 million and 32 million visitors to our estate each year.

Deputy Naughten referred to the excellent joint venture we have with Roscommon County Council. Lough Key forest park has had 59,000 visitors in the past year. Coillte also has received excellent co-operation from South Dublin County Council and Dún Laoghaire-Rathdown County Council in creating the Dublin mountains partnership. Members may have seen the initiatives in that area, including the volunteer ranger service which we want to roll out nationwide. We also have the Dublin Mountaineer bus service offering a circular route from the local DART and Luas stations up to the mountains.

Coillte is very serious about recreation and the need to expand our services to the wider public. Coillte Outdoors is probably used more than any other website in Ireland by people trying to find out what they can do in particular areas. It has a fantastic set of resources and is a great example of the investment made under the forest recreation-tourism infrastructure programme of Bord Fáilte some years ago. This investment is now paying significant dividends as we have a world class resource, not only walking paths but also mountain bike trails and other assets.

I ask Mr. Egan to comment on other issues raised, including the questions on ponies and horses.

Mr. Gerry Egan

Before 2006, we and our predecessor organisations had a passive approach to forest recreation. In other words, the position was that the forests were open and people could use them if they wished. In 2006, we published a strategy entitled, Healthy Forest, Healthy Nation, which was done after an extensive consultant process with many interests in the tourism, recreation and sport areas. The strategy set out the types of recreation we wanted to encourage, the types of partnerships we wanted to develop, the types of investments we wanted to make and the types of uses to which the forest could be put. Arising from this, Coillte was able to approach Fáilte Ireland and secured, for instance, a €9 million investment for the Lough Key development. We invested a further €5.4 million, with support from Fáilte Ireland, in building three mountain bike trails, including 90 km in the Ballyhoura mountains. We are working closely with Ballyhoura Fáilte to ascertain how local tourism benefits can accrue from the project.

As Mr. Gunning pointed out, most of these facilities are available free of charge. For control rather than revenue raising purposes, we also facilitate some other activities on a licensed basis. For example, we license equestrian centres to engage in pony trekking on Coillte land. We do so to ensure conflicts do not arise with other users. Pony trekking and walking do not necessarily co-exist well, for example. The charges for such licences tend to be nominal.

We discussed what is being done in Roscommon and the Dublin mountains. We have a very good partnership in the Ballyhoura Mountains with Cork County Council and Limerick County Council. Many similar local community projects are taking place around the country and while some are obvious, more often than not they take place under the radar.

A related and significant issue is dumping, on which we receive extensive representations. We have a significant dumping problem because with the best will in the world, policing 6,500 properties — effectively 6,500 small to large farms — is extraordinarily difficult. We estimate that we are spending about €800,000 per year on refuse collection and removal. Anybody who watched the "Prime Time" programme on tyre dumping last Monday week would have seen our regional director being interviewed, because our forests are becoming a target for the unscrupulous operators working in this area. In some cases, we take the rubbish away. In many cases, we are working with local authorities on joint surveillance operations to see if we can identify the people involved and support prosecutions. We are starting to see some successful prosecutions coming through. In areas where we do not have our own staff, we have a network of caretakers to whom we pay allowances to keep an eye on things on our behalf and report any problems to us and the local authority.

We have a project in Wicklow called "Pure", where we work closely with the local authority and the local communities on refuse collection. Ultimately, the issue is about the resources available to local authorities and the desire for the enforcement of the legislation that exists, rather than looking to the landowner who essentially is the victim rather than the source of the solution.

Deputy P. J. Sheehan

I asked a question about the differences between logs delivered to Grainger Sawmills and logs delivered to Belview in Waterford and Clonmel.

Mr. David Gunning

I will deal with that, but could I also comment on——

Deputy Seán Sherlock

On a point of order, I referred to the contentions made by the Irish Forestry Contractors Association in respect of the 2010 ratio of standing sales. The following has been alleged by the forestry contractors to this committee.

Coillte wants to take over most of the standing sales and is only putting up for 40% of timber for standing sales to the mills contractors and is taking over more of the harvesting sales, which amounts to approximately 53%. This will force the mill contractors to tender against Coillte contractors who are already in dire straits. We have been informed by the mills that Coillte has taken up to 100,000 cu. m off the system for optimisation.

We need some concrete answers to these allegations.

I also posed a question on the relationship with the banks. I would like to know which banks Coillte has been dealing with. Has it had any dealings with Anglo Irish Bank?

Mr. David Gunning

I can answer that. We have not had any such dealings.

Deputy Seán Sherlock

Does Coillte have a legal obligation to remove refuse that is dumped illegally? The company has reduced its staff down to a core group of about 500 employees. This means that there is not as much of a presence and if the standing quota of staff is reduced, then the company cannot be as vigilant on forestry management and illegal dumping. The sub-contractors will not be vigilant on behalf of Coillte in respect of illegal dumping. There will have to be a core staff in certain sectors that will be able to police illegal dumping. If this does not happen, we will not be able to control the tidal wave that follows. It is getting worse in Munster and in my own region.

Deputy P. J. Sheehan

I would like to ask another question.

Chairman

There are many speakers who want to ask a question, and the Deputy cannot be following up all the time.

Deputy P. J. Sheehan

There is no point in being here if we cannot ask questions.

Chairman

There are many other people here and I want to be fair to everybody.

Deputy P. J. Sheehan

I want to follow up on Deputy Sherlock's observations. The report states the following:

The State-owned forestry body, Coillte, has finalised a €220 million long-term debt facility with a consortium of banks as part of the restructuring of the agency's debts. Rabobank and HSBC bank participated in the deal which will give Coillte access to a €220 million debt facility. The company will use the bank finance to help fund a major diversification of its interests beyond forestry.

Coillte was established to promote forestry and to avail of it.

Chairman

I will now take questions from all other members.

Deputy Andrew Doyle

Carbon sequestration was mentioned in the presentation. It appears that replanting is being held back. Is an advancement of planting by Coillte being held off until it is determined whether forestry is to be used as a carbon sink? Is there a module in the training schools that deals with forestry?

I read in a New Zealand publication that there is speculation about growing pinus radiata without even thinning it, because of the ETS for the agriculture industry. It is calculated that there might be 75% to 80% net carbon sequestration from such a policy. Do the witnesses have any thoughts on that?

I acknowledge the role Coillte has played in providing amenities like the Ballinasloe cycle track. Has the Avondale development project come to a standstill?

Deputy Edward O’Keeffe

I welcome the witnesses here today. I had to meet a Minister with a deputation, so I apologise for not being here for some of the presentation. A diversified politician like me is always very busy.

What activities does Coillte have in the Netherlands? The report states that 100 truckloads of products are exported daily. What kind of products are these?

Coillte was set up in 1989 and it has done very well from a business point of view, with a profit of €4.2 billion in a difficult trading environment. Is that profit net of depreciation? If so, it is a very good performance. What was the company's capital investment in the past that it had to be reduced by €17 million? Page 8 of the presentation states that Coillte is continuing to focus on costs across the group and new sources of revenue. I do not want to dwell on confidential issues, but I would like the witnesses to elaborate on this point.

How does Coillte propose to eliminate major forest fires in future? What safeguards will be put in place? These fires are a danger to the public as much as they are a danger to forestry.

Illegal dumping is a problem for farming communities living on side roads as much as it is for Coillte. Has Coillte considered putting video cameras on sensitive areas where dumping is likely to occur? Local authorities have also failed to do that at bends in roads. It would be an innovative way to address the problem. There might be a cost factor, but the issue needs to be resolved. I would admire Coillte if it could do that.

Glennon Brothers is a privately owned timber facility in east Cork. It imported timber from Scotland through the port of Youghal. Has that discontinued? Did it import because Coillte overcharged resulting in it being uncompetitive? We hear considerable talk about poor grade finished timber being imported from the North of Ireland into the South. This is coming from abroad. Do the delegates know much about that? It is having a fairly serious effect on the timber and hardware merchants. There are also doubts about VAT being paid and so on. While it is not really a matter for Coillte, the delegates might elaborate on that matter also. I might have a few supplementary questions later if the Chairman allows me to ask them.

Deputy Bobby Aylward

I apologise for being late owing to my participation in a debate on local radio. I welcome Mr. Gunning and Mr. Egan. I compliment Coillte on how it manages its business particularly SmartPly in Belview, south Kilkenny and Medite in Clonmel. It has captured an export market. This week I again met the managing director, Mr. Neil Foot; I meet him on a regular basis. The man is on top of his job and is doing a brilliant job there. I believe exports to the United Kingdom have increased by approximately 60%.

The delegates mentioned the Minister, Deputy Ryan, in reference to the new law allowing Bord na Móna and the ESB to take mature timber to burn for energy, which I regard as a crying shame. Cutting mature timber which takes 25 or 30 years to grow to burn it is a waste. There is very little job potential as the wood is simply cut and burnt. Using the timber in SmartPly and Medite, and at other sawmills will create jobs. SmartPly and Medite employ 300 people making panel products for export. However, it is completely wrong to cut mature timber to burn it. We need to do something about this. I will ask representatives of Coillte to appear before the Oireachtas Joint Committee on Climate Change and Energy Security. Perhaps this committee should also invite them in here to seek to influence the Minister——

Deputy Michael Creed

They are already in here.

Deputy Bobby Aylward

I refer to representatives of Medite and SmartPly, which are branches of Coillte.

Depots and stores throughout the country are packed with meat and bonemeal which we need to export to Germany to get rid of. There is an ongoing supply from the rendering of animals and so on. If Bord na Móna built an incinerator with the proper cleaning system, it could be used in incineration. It is a crying shame that it is not being used. We need such a facility sooner rather than later.

Chairman

A decision is pending on an application in County Meath.

Deputy Bobby Aylward

I hope that will come through and all this meat and bonemeal will be used to create jobs and energy. We must stop burning mature timber. It is a crying shame to grow trees for 25 or 30 years only to burn them. We need to do something about that and use them through sawmills and the Medite plant and so on.

Several members mentioned illegal dumping. County Kilkenny has much forestry and everywhere one goes one finds litter. While I know it is nearly impossible to manage this, there must be some co-operation between the local authorities, the Department of the Environment, Heritage and Local Government and Coillte to try to address the problem. While I do not know the answer, if we do not deal with it soon, the country will be destroyed. It is being destroyed as it is. Everything from cars to dead animals is being dumped. Unless we do something about it, it will come to a head some day. I ask Coillte to talk to the local authorities and the Department of the Environment, Heritage and Local Government to see if it can come up with a joint policy to control dumping.

The submission we received from the contractors stated that there is considerable loss in forestry because Coillte does not have the manpower and maintenance is not being carried out on forests. We hear figures of losses of 20% or 30% and that Coillte believes it has a certain amount of timber grown to a certain stage but when it goes back it finds it is lost through lack of maintenance, spraying or thinning. Is that true? I have even heard of places with 50% of loss of planting — even in private planting. It would be terrible if we lost that much especially in the private sector where we are giving grants to individuals to grow trees. If there is a loss of even 20% that is too much. Is Coillte experiencing losses in its own owing to a lack of maintenance, spraying and thinning?

Deputy Michael Creed

On the latter point that Deputy Aylward made and referred to by Mr. Gunning, it looks like the law of unintended consequences applies to the announcement by the Minister, Deputy Ryan. The committee received a very impressive submission from people involved in biomass and made a recommendation that the Department of Communications, Energy and Natural Resources should review the tariff paid. The point was well made and it is undoubtedly true that the level of activity in the biomass sector was restricted because there was not a realistic return. I understand a rate of 15 cent was announced, which could undermine the flow of raw material to the Medite plant, which would have a very serious consequence. Would Coillte itself then proceed to get into biomass or is it seeking a stay to be applied to the flow of forest products into the biomass sector? Other crops can be cultivated such as miscanthus and willow which are more directly suitable.

Based on what I have seen Coillte does not haul out all the biomass resource when doing a clear fell. For example it leaves the roots, which could be used as a resource. We may not be making the most of the potential. The last time the delegates appeared before the committee, Coillte was dabbling with pelleting as a way of dealing with this raw material. I ask them to comment on that. It raises serious issues about the future of the Medite plant. At some stage in the not too distant future we should get Coillte's overview on this issue because obviously we do not want to lose Medite.

While it might be beyond the delegates' remit, on the management of private forestry thinnings, the State has given grant aid to the private forestry sector to get involved in increasing the national acreage. There is a view that management of much of private forestry is not great as thinnings are not taken out. I would like to hear the delegates' view on this.

My final point relates to a local issue in regard to which we have been in contact with Coillte, namely, the proposed sale of 21.41 hectares of Kilmurry forest, Waterfall, Ballinora, County Cork. I note from the delegation's correspondence that this forest was acquired in 1963, planted in 1964 and that there is an access issue. Coillte insists that the proposed disposal is compliant with all its excision policy. A local community group interested in this property and in maintaining the access which the local community has had to the forestry for several years believes there is undue haste in regard to this disposal. The community group was first appraised of the proposal in March and is now confronted with contractual documents having been issued to a preferred purchaser. A community group cannot respond as quickly as a private individual. This disposal was brought to the group's attention in March. We are now almost at the end of May, some eight to ten weeks later. It is not unreasonable for this community group to feel aggrieved at the haste involved and to believe its signal, communicated to Coillte, in regard to its interest in acquiring the property is being ignored. I understand the group has communicated that it will have a plan in place by end June. A public meeting on the issue is taking place tonight in Ballinora.

All I am asking at this stage is that Coillte steps back from this. Obviously, Coillte must obtain a return but it is closing the door on one party. It was announced in March in the Ballinora newsletter that this forestry was to be put up for sale. To close the deal in this regard at the end of May without giving a community group, which cannot respond, raise funds quickly or create locally the necessary awareness of what is at stake, an opportunity to put its proposal is not right. I ask that Coillte step back from the brink and give this group an opportunity to put its proposal on the table and not to conclude a sale until such time as it can be evaluated.

Deputy Bobby Aylward took the Chair.

Acting Chairman (Deputy Bobby Aylward)

I invite Mr. Gunning to respond to the many questions raised.

Mr. David Gunning

I would like if I may to respond first to Deputy Creed's question. I will then try to address the other questions. Deputy Creed will be aware that I received yesterday an e-mail from the group concerned. This process has been under way for almost 12 weeks. We will examine the proposal contained in the e-mail, try to understand what is being proposed and decide how we should proceed. That is all we can do at this stage.

Deputy Michael Creed

Contracts have not yet been signed and it would be foolish in the extreme to conclude a deal without considering the proposal. Conspiracy theories are afoot. Haste will fuel those conspiracy theories. We should not add to that and should allow the community group every effort to put its proposal.

Acting Chairman (Deputy Bobby Aylward)

Before we move on I will allow Senator Buttimer to come in on the same issue.

Senator Jerry Buttimer

I reinforce what has been said by Deputy Creed. It is important that clarity is brought to this issue. I am a little disappointed with the response I received from Coillte today. Deputy Creed and I have met representatives of the local community. I am concerned that there has been no due process in this matter. I note Mr. Gunning's remarks in response to Deputy Creed. This is a community project which was swept aside by Coillte. I too have questions on Coillte's excision policy. Coillte has not engaged properly with the Ballinora community representatives. It has left a poor taste out there. I am not disputing the merits of the other proposal involved in regard to this property disposal. However, Coillte has a once in a lifetime opportunity to support a meaningful community project. I am disappointed with the response to date in this regard.

Deputy Johnny Brady resumed the Chair.

Mr. David Gunning

We have great faith and trust in our processes. We are involved in a significant number of transactions every year. We advertise every sale, seek expressions of interest and deal with those parties that come forward. In this case, as of today, we still have no offer. We have received an e-mail from a particular group but nothing else. I am willing to examine that interest at this stage. We have a process which is transparent. If we did not observe that process we would be chastised here for not doing so. I will end by saying we will examine the e-mail I received on behalf of this community group and will determine the appropriate way to proceed.

Senator Jerry Buttimer

Mr. Gunning might also respond to my e-mail sent last week.

Mr. David Gunning

I apologise if the Senator has not received a response. I asked a colleague to deal with the issue. I will guarantee the Senator a response in the near future.

Deputy Sheahan and others raised the issue of private forestry and Government investment in forestry. Under forestry policy dated from 1996 we must build 15,000 to 20,000 hectares per year. The programme for Government calls for 10,000 hectares. The climate change strategy assumes we are going to plant 15,000 per annum and there is funding available for approximately 7,000. That is the reality of the targets and how they inter-relate.

I hasten to add that this is an issue primarily for the Department of Agriculture, Fisheries and Food and the Forest Service. All of the incentives put in place to attract third parties into afforestation are focussed on the farming community. A farmer attracts a higher level of grants, payments and subsidies. Coillte, given the price of land in recent years, is no longer purchasing land and putting it under forest. We simply cannot make money from doing so. We know the magic number land must reach to allow us get back into this game, in respect of which we believe we can put before our board a compelling business case.

In the absence of our buying land we are working in farm partnerships. We form a partnership with a farmer and plant the land. Last year, we planted 1,000 hectares in farm partnerships, which is approximately one-sixth of the overall national achievement. In addition, we replanted four thousand eight hundredths of our own land. To be crystal clear, we replant all of our own land within the timeframe laid down in the felling licence. There is no unplanted land. There is no backlog of land that is not being replanted.

Deputy Tom Sheahan

What is the limit?

Mr. David Gunning

The limit is governed by what one cuts down. One then has a year within which to replant it.

Deputy Tom Sheahan

One year?

Mr. David Gunning

Yes.

Deputy P. J. Sheehan

Many cuttings in the past four years have not been replanted.

Mr. David Gunning

We are a service provider to those involved in the forestry business. We are interested in providing those services. We have the largest nursery in Ireland and want to sell plants. That we have not been able to hit those targets has been a disappointment for Coillte and the Department of Agriculture, Fisheries and Food. If anything, the current focus on biomass, exports and carbon means we absolutely must hit these targets. There is no doubt but that we need to do more. Coillte will play its part in this regard. I hope my response deals with the questions raised.

Mr. Gerry Egan

To build on what Mr. Gunning said, this leads us into the issue of biomass. The mobilisation of these private forests and the markets for biomass and development of the biomass sector are inextricably linked. We share the concern that hundreds of millions of euro of State and EU money has gone into planting these private forests. A market mechanism is needed to make sure this material comes to the market at the appropriate time. Some of that is achieved by businesses such as SmartPly buying that material but the other big area relates to the biomass opportunity. In regard to an issue that arose in that respect, Coillte is pro-biomass and pro-forest products being diverted into the biomass sector. I say that in case any confusion arises from that in regard to the Medite issue. We are very much in favour of the use of forestry residues and are harvesting more of these residues rather than leaving them behind in the forest. They are used for renewable heat in, say, process heat in pharmaceutical plants or for highly efficient combined heat and power plants. There is a great opportunity in that respect and it is something on which we are actively working.

With regard to the part of the biomass spectrum that relates to using this material for co-firing of peat stations, our concern is that material would be diverted from Medite into that area. We see biomass as being of huge value to State forest owners and private forest owners, but the specific issue is around the diversion of material into a less efficient use, which is to do with co-firing of peat plants. I wanted to deal with that specific issue.

Deputy Michael Creed

Will Mr. Egan submit a response on that issue so that we can follow up on it.

Mr. Gerry Egan

I will be happy to do that.

In terms of issues raised by contractors, there are a number of aspects involved. In this respect, we have heard of log prices, imports from Scotland, the split between standing and harvested sales, the complications for contractors and all that goes with that. One of the advantages of the position Coillte plays in this market is that in 2008 and 2009 when there was a huge fall off in the demand for timber in the construction industry in Ireland, the easy and, probably in some respects, the short-term commercially smart thing for Coillte to have done would have been to withdraw from the market rather than to sell material at uneconomic prices. One of the advantages of the position Coillte plays in the market is that whether prices are good or bad, we will make all the supply available in any given year. That means there is raw material available for the sawmills in terms of developing new markets and critically work is available for contractors in good times and in bad. The other advantage of Coillte being involved in SmartPly and in Medite is that we will always keep the outlets for the residues available during those times. That is an important point in terms of setting the level.

Historically what has happened is that there has been a split — typically one of approximately 50:50 — between timber that is offered for sale on an annual basis, the more valuable material which is sold standing, and the less valuable material which Coillte harvested for market reasons that I do not need to go into. Over the years that percentage has swung 55:45 one way or the other, which is entirely a function of the market for material in any given year, the mix going into the market and the most appropriate way of doing that.

A specific issue has arisen in the current climate. The issue that has arisen concerning contractors is that historically a significant proportion of the work that would have been made available to contractors was done through local negotiation. For reasons of good governance, we have moved to a situation where all of our procurement is done through a competitive process. However, a minority of contractors would favour the old system, they would prefer not to have to compete with others contractors. Our position is that from a business point of view it is the appropriate thing for us to do but from a governance point of view in the environment in which we operate it is critical that our processes are seen to be absolutely transparent. That is one aspect.

In terms of supplying material into the market and this addresses a point made by Deputy Edward O'Keeffe, all the logs we sell to the sawmill sector are sold through an auction system that is wholly transparent and it is run every fortnight. Every log is sold through that system and every sawmill knows who bought the lot that was up for sale and price that was paid for it. No side deals are done; nothing is done under the radar and this is very much part of the culture of the organisation. There are no exports of logs from Scotland and that is largely driven by the fact that the demand for product for renewable energy in the UK is such that a huge volume of material is moving into the renewable energy market. The sawmill to which the Deputy referred in his constituency, had a significant first record last year in that it was the first sawmill in either Ireland or the UK that exported to the French market. This is a dynamic sector and Coillte is trying to provide stability and continuity and to make sure that in all its transactions, whether they are related to buying services from contractors or selling logs to sawmills, there is absolute transparency in the way those processes operate.

Mr. David Gunning

I will elaborate on this issue in terms of Bill Grainger's logs in Enniskeen. When we sell the logs standing, the customer pays for them when they cross the weighbridge. We sell our timber in volume terms. We do that because of the moisture content — effectively the water that is in trees — varies throughout the year. It is fairer to sell timber in volume terms. Therefore, once logs cross the weighbridge, we weigh them, we take off a sample of logs, we check from the volume and go to weigh and we apply that factor to that truckload to find out how many cubic metres of timber are in the truckload. That is how we work out that calculation. It is done on every truckload to every sawmill. As Mr. Egan said, this is an agreed practice with the industry.

I advise Deputy Sheehan that the more contentious issue is the shipments of pulp material from Coillte's forests in a self-supply situation and also from the sawmills to our manufacturing plants in Clonmel and Waterford or south Kilkenny. We do that on a different basis for several reasons. We convert it from tonnes to cubic metres in a different fashion. We have ten years of data for that material and we calculate the volume based on our historic and moving averages, which is important to understand.

In response to requests from the Irish Forestry Contractors Association, we commenced a number of studies about eight months ago, which will be brought to a conclusion at the end of July or early August at which point we will agree how to proceed, whether by way of the new system or a slightly modified system. That is the point we are at in regard to that issue.

Deputy P. J. Sheehan

Why is there a difference between Grainger Sawmills and the other one?

Mr. David Gunning

We have a 100,000 truck movements of logs every year. If we were to stop every truck coming into SmartPly, we would not be able to get the material in the door. In reality, it is the practical position.

Deputy Edward O'Keeffe asked where are the 100 truckloads going out the other side. There are more than 100 trucks coming in to let 100 trucks out. The standard roll-on/roll-off truck brings either MDF or OSB to markets typically in the UK and in the Benelux countries.

Deputy P. J. Sheehan

I have a question that relates to every householder. What happened to the trees that we were promised under Bertie's €4 million millennium project in 1999? What percentage of those trees have survived, or were they planted and did they grow?

(Interruptions).

Deputy P. J. Sheehan

Every householder got a certificate of his or her tree and he or she cannot locate the tree.

A Deputy

Is the Deputy worried about his tree?

Deputy P. J. Sheehan

I am worried about it.

(Interruptions).

Deputy Edward O’Keeffe

I thank the delegates for answering all my questions as best they could. An issue always arises when a forest is cut down and where a farmer's grandfather may have sold the land back to Coillte. The question of whether to buy it back arises from time to time but it is my experience people do not get very favourable consideration from Coillte, especially in the Killamullen area. I would like the delegates to look at this matter more favourably. I realise they have to get value for money and there is depreciation.

Is it Coillte's intention to replace the contractors in the woods with its own staff? Would that be more cost effective? It has been said to me that is the aim of the organisation.

We have the fastest growing timber in Europe, much faster growing than that of the Scandinavian countries because of our climate and high rainfall.

Deputy P. J. Sheehan

The Deputy is availing of the question time of other Deputies.

Chairman

Allow Deputy O'Keeffe to continue.

Deputy Edward O’Keeffe

Are we at a disadvantage regarding sawing because our timber is wide at the bottom and grows into a narrow shape, being so fast-growing? Does that lead to inefficiency at saw mills?

Regarding diversification, it is very obvious to me that Coillte will diversify into other activities because it is trying to spread the load and get away from its core business where the margins are dropping, for different reasons. I cannot say whether nursing homes——

Chairman

Coillte's answer was that it is not involved in nursing homes.

Deputy Edward O’Keeffe

——are the appropriate way to go. We will all finish up in one someday and can build a race course out of the hospitality——

Chairman

Some of these questions have been asked and answered.

Deputy Edward O’Keeffe

Does Coillte have plans to diversify into other activities?

Chairman

Am I in the Chair at all? I call Deputy Andrew Doyle.

Deputy Edward O’Keeffe

That question was not asked.

(Interruptions).

Chairman

It is not my fault. We have been here since 11 o'clock.

Deputy Andrew Doyle

I do not have a question.

Deputy Seán Sherlock

I asked a question relating to the bank.

Mr. David Gunning

Mr. Egan will deal with that. Deputy Doyle raised the issue of Avondale. I am reading the life of Charles Stewart Parnell at present so this is of interest to me. People will be aware we spent some money in a joint venture with the OPW to refurbish what is called the "Old Shed", which was originally designed and built by Charles Stewart Parnell, with a view to having some kind of an events centre that would be owned by Coillte but possibly managed under the OPW's remit or in co-operation with it. When we ran out of money the project stopped and currently is on hold. The building is waterproof and is practically finished on the outside. We had a discussion only this morning about how we will re-energise that project. We are in the process of recruiting or bringing in a number of engineers to give us an assessment of what needs to be done to finish it so that we can put a price tag against it and determine whether it is an appropriate thing to progress.

Mr. Gerry Egan

Regarding Deputy Sherlock's question, there is an open question in regard to the banking facilities and so on. To recap, briefly, the legislation enacted in December provides that Coillte will have a borrowing limit of €400 million. On the back of that we were able to complete our negotiations with the banks and then put in place banking facilities — not a loan but the facility to borrow up to €260 million. Six banks are in the syndicate from which we borrowed that money and which is led by Bank of Ireland. Anglo Irish Bank is not part of that syndicate and we have never had dealings with it. I am not certain——

Deputy Bobby Aylward

You are one of the lucky ones.

Mr. Gerry Egan

All I can say, from that point of view, is that despite the fact that we re-financed that debt at a very difficult time in terms of the economy, we were able to re-finance the debt on favourable commercial terms, on the basis that we had a very compelling business plan. We had plans about how we would reduce our costs and diversify our revenue streams and consequently we were able to put those facilities in place for a period of three years.

Currently, we see the company as well funded. Its debt amounts to only about 13% of the book value of the business. Despite the somewhat unfortunate circumstances by which the legislation was enacted quickly, which perhaps gave the impression there were some difficulties that needed to be resolved, the actual difficulties were technical and related to the conditions of the facilities being put in place rather than being substantive issues around the company's ability to finance its operations and so on. We were delighted to have the opportunity today to put that issue to bed.

Deputy Edward O’Keeffe

Are Coillte's borrowings in euros or in other currencies?

Mr. Gerry Egan

Only in euro. Regarding the specific point raised by Deputy Sheehan, I was and still am a member of the board of the People's Millennium Forest project. I am happy to confirm that 1.4 million trees were planted in 2000. Some 611 hectares of forest are covered by that project and those areas are thriving.

Deputy P. J. Sheehan

That is contrary to the information I have.

Mr. Gerry Egan

I can reassure the Deputy, for the simple reason that we recently completed an audit. Every site was checked out independently and the audit is available on the People's Millennium Forest website as a public document. Given that this autumn will represent the tenth anniversary of the project, a decade that has flown by, we are looking at what kind of event we might have to mark that tenth anniversary.

Deputy P. J. Sheehan

They are all well and thriving.

Chairman

Yes, they are all doing well. I ask Mr. Egan to continue.

Mr. Gerry Egan

All 14 sites are thriving. It is a natural process.

Deputy P. J. Sheehan

I have some information here——

Mr. Gerry Egan

There are many more than 1.2 million trees now as a result of the planting that was done.

Deputy Seán Sherlock

On a philanthropic and very local issue, a 67 year old man living by a forest pathway in north Cork, without electricity, wanted to get an electricity connection. He was told by Coillte he would have to pay €80,000 for that to be facilitated by the ESB. There was toing and froing and he was subsequently told it would cost him approximately €14,000. This is a man who has lived in the forest all his life, who, late in life has decided he wants to electrify his little holding. He cannot pay €14,000. If there is any way in which Coillte would see its way to facilitating this man in his autumn years he would be very grateful. I have a note on the details that I can pass to the delegates. It would be a major feather in Coillte's cap.

Chairman

Those types of people should be facilitated because they were brought up in the forest.

Deputy Edward O’Keeffe

Has the ESB not a role to play as well?

Deputy Seán Sherlock

The ESB side is such that the situation is all squared off and it is ready to go. Coillte is the sticking point.

Mr. Gerry Egan

We will have to investigate that a little further.

Chairman

On behalf of the committee, I thank Mr. Gunning and Mr. Egan for their presentations and for answering the committee's questions.

The joint committee adjourned at 2 p.m. until noon on Wednesday, 2 June 2010.