I am pleased to come before the committee to introduce myself to members, give my initial views on a vision for Coillte and outline my approach to the role of its chairperson. I was attracted to the role because I believe that Coillte’s core activities in forestry, forest products and renewable energy have never been more relevant or important and I admired its capacity to transform itself in the past five years under the excellent leadership of the board, the CEO and the senior management team. It conducts its business in a wholly professional manner. The organisation, which celebrates its 30th year in existence in 2019, has its brightest years ahead. Before I elaborate on this, I wish to provide members with some background on my track record.
I am an accountant with extensive experience in HR and governance as well as significant executive and non-executive experience in the telecommunications, energy, financial and education sectors. In addition, I have broad consulting experience in the commercial sector. I understand the commercial semi-State sector through my roles as worker director and, subsequently, HR director in Eircom at a time of great change, and as chair of EirGrid from its inception in 2005 for a period of eight years. I have also served on a number of other boards in the State sector and am a current member of the governing authority of DCU.
As a Longford person, I understand the importance of rural development and fully appreciate the role Coillte plays in that context. I am committed to creating a better Ireland for all of our citizens and believe that semi-State organisations have a particular responsibility in this regard. Consequently, I served as a member of the board of Business in the Community Ireland and have held several other voluntary positions in the not-for-profit and sport sectors, including my current role as a member of the GAA audit and risk committee.
In Coillte, I see an organisation that is aligned with my interests and values. I believe it is a place where I could make a real impact and help to steer the right course on the next phase of its development. That next phase needs to focus on consolidation of the changes effected to date and build on this momentum to contribute further to Ireland’s approach to forestry, climate change and use of our natural resources for the greater good of Irish citizens. My experience of the State sector, and the energy sector in particular, together with my experience of change and governance leave me well placed to lead Coillte in this phase.
Coillte was established in 1989 as a commercial State company. It has been on a journey of change and transition from being embedded in the Civil Service to becoming a profitable, innovative and customer-focused State-owned commercial company. At the core of the business is an estate of 7% of the land area of Ireland, comprising approximately 450,000 ha or in excess of 1 million acres. This estate comprises approximately 6,000 individual properties, which are spread across the country. This dispersal of properties means that in addition to being the largest landowner in Ireland, Coillte has a substantial public interface and a deeply rooted relationship with the communities in which it is embedded. I will return to this social dimension of the company and its unique role within rural Ireland.
The core activity on Coillte's lands is, of course, commercial forestry operations. However, the estate features extensive upland areas which have some of the best wind resources in Europe. In the past ten years Coillte has, through its land solutions business, established itself as one of the State's largest developers of onshore wind farms. Forestry and land solutions form two of the company’s three divisions, with the third being Medite Smartply, which is focused on the manufacture of sustainable building products for the construction sector at its plants in Clonmel, south Tipperary and Belview, south Kilkenny.
The company is in strong financial shape. Last year it had excellent results across all key financial metrics, with record revenues of €330 million and record earnings before interest, tax, depreciation and amortization of €115 million. This strong financial performance, combined with the sale of Coillte's interests in a number of operating wind farm assets, allowed the company to reduce net debt to just €15 million, reinvest almost €40 million in its forests for future generations and pay its shareholder a substantial dividend of €15 million.
This strong performance is the culmination of a transformation that has been taking place in the business over the past number of years and which has seen the group go from cash neutral from recurring operations in 2014 to €30 million cash positive in 2017, doubling this to €60 million in 2018. The company is now generating a cash yield of approximately 4.6%, which puts it in the top tier of State-owned forestry companies across Europe.
While it is clearly important that our State-owned companies perform well financially, it is not the only reason for the State to own a forestry company. Forests serve multiple and interrelated social, economic and environmental functions. As well as providing a reliable supply of sustainably produced wood fibre to a thriving timber industry which provides jobs and incomes in rural Ireland, forests continuously sequester carbon as they grow and products made from harvested wood safely lock-up carbon and provide an environmentally friendly substitute for carbon-intense products such as plastic, concrete and steel.
The imperative to decarbonise our energy and production systems in the coming years means that forestry, forest products and renewable energy have never been more relevant. Coillte is ideally placed to thrive in this environment. For example, last month it announced that it is engaged in bilateral discussions with ESB which, if successful, would lead to the establishment of a new joint venture development company to deliver 1,000 MW of renewable energy by 2030. This joint venture could provide enough green energy to power significantly more than 500,000 households annually, thus making a significant contribution to Ireland's energy transition.
Although our forest sector is small by European standards, it is young and dynamic and recognised by its peers internationally as being innovative, progressive and technologically very advanced. Last year, the Department of the Taoiseach published a national policy statement on the bioeconomy, which outlined a vision for Ireland as a world leader in the emerging bioeconomy. As the backbone of the Irish forest sector, Coillte is well positioned to drive the development of forestry and forest products as a central pillar in that emerging bioeconomy.
Forests also provide important non-commercial or public good benefits. They purify water supplies and regulate water flow, mitigating the risk of flood. They are a low-intervention land use which help preserve soil stability and fertility. The life cycle of forests is relatively long and, between planting and harvesting, forests provide an important habitat for wildlife and a place to recreate and experience nature.
The Coillte estate has 12 forest parks, almost 300 recreation sites and more than 3,000 km of hiking trails. It is estimated that there are 18 million visits to our forests each year. Working with other stakeholders such as Fáilte Ireland and the Department of Rural and Community Development, Coillte is investing in the rural economy through the advancement of exciting projects such as the redevelopment of Avondale and four world-class mountain bike trails situated across the country. In addition, more than one fifth or 90,000 ha of the estate is dedicated to biodiversity, which the company is intent on protecting and enhancing. Coillte participated in the recent seeds for nature initiative promoted by the Minister for Culture, Heritage and the Gaeltacht, Deputy Madigan, at which it announced the investment of €500,000 in the restoration of a magnificent alluvial forest at Hazelwood, County Sligo. Coillte's substantial contribution to these social and environmental benefits are funded by its commercial activities. The company recognises the increasing demand for these social and environmental services from our forests and is exploring how this important aspect of its work can be developed further in partnership with others.
Of course, as is particularly evident today given recent events, the greatest uncertainty facing Coillte is Brexit. The UK is a vital market for the Irish forest products sector. A hard Brexit on WTO terms would have serious implications for the company through the imposition of non-tariff barriers to trade and tariffs on panel products. It would be likely to result in significant delays for exporters and increased compliance costs.
In this scenario, it is also likely that a significant slowdown in UK construction activity will occur with a consequent worsening in the trading environment for our products. Great Britain also has a relatively low level of forest cover and, therefore, a limited indigenous supply of wood. It is currently the second largest importer of timber in the world and we believe that the impact of a hard Brexit if it comes to pass, while serious in the short term, will be overcome by larger macro-economic forces in the medium and longer term.
In addition, the Irish construction sector continues to thrive with housing completion up over a quarter from 2017 to 2018 and signs of buoyancy continuing - at least in the foreseeable future. It is right and proper that the State expects a business performance from Coillte that is on a par with the best in the private sector and that it expects the State assets vested with it with to deliver sustainable returns over time. The net asset value of Coillte's balance sheet is approximately €1.3 million.
I would like to take this opportunity to commend the former Chair, John Moloney, the outgoing CEO, Fergal Leamy, and the board, management and staff of Coillte on their achievements in transforming the company over the past five years. I am committed to building on the sound platform they have created and to making a contribution in supporting and challenging the management to drive the business even further forward. I firmly believe we can continue to drive a strong commercial performance and, at the same time, provide a valuable environmental and social dividend to society at large. I thank the committee and look forward to members' questions.