asked the Minister for Energy if he has studied the economics of the timber cycle as it affects Irish production, in order that the capital requirements of Coillte Teoranta would be properly determined.
28.
Ceisteanna—Questions. Oral Answers. - Coillte Teoranta's Financial Difficulties.
6.
asked the Minister for Energy if he has had any discussions with Coillte Teoranta about their cash flow difficulties; and, if so, the advice he gave in the matter.
I propose to take Questions Nos. 6 and 28 together.
It was acknowledged when Coillte were established on 1 January this year that, given the age profile of the transferred forests and their current and prospective timber production, the new company would not break even for a number of years. For this reason the Forestry Act, 1988, included financial provisions relating to both current and capital expenditure which would allow some Exchequer funding of the company to continue for a time.
This funding is limited so as to encourage the company both to introduce efficiencies and to make use of their commercial mandate. It takes into account both an increasing annual planting target and growing revenue from timber sales.
When the Minister introduced the Coillte Teoranta Bill in the House we were given to understand that the arrangements made for the transfer in the lead-in period would be fully financed. However, it now seems that Coillte have a cash flow problem which does not seem to indicate that even the initial year was covered. Have the cash flow difficulties been ironed out?
There are no unforeseen difficulties in regard to Coillte's cash flow. My Department are in constant contact with the company and I am satisfied that their financial situation will be reasonably provided for under the arrangements already mentioned.
Is the Minister aware that contractors have engaged in the harvesting of timber throughout this year and that they had forward contracts with the company? However, they were told four or five weeks ago to cease work as the company did not have the cash, which seems to be contrary to what the Minister said. Will he please explain this?
The Deputy will have to accept that Coillte has been established as a commercial State-sponsored body and it is our intention that the company would be allowed to operate commercially as freely as possible. There will not be unnecessary interference at ministerial level in their day to day operations as it is not my wish, or indeed my role, to interfere in that way. I am not aware of any cash flow difficulties being experienced by Coillte. As the Deputy will appreciate, my Department and I are in constant contact with Coillte and any difficulties would be made clear to us without any delays. There is no indication of that type of difficulty arising and commercial decisions that Coillte are required to make from day to day and week to week are a matter for the board and the management.
I want to call Deputy Creed, who has a question tabled on the subject.
I accept that Coillte Teoranta must operate on a commercial basis but, given the historical role of the forestry industry as a back-up in deprived areas for the provision of employment and industry, is the Minister aware that because of cash flow difficulties Coillte Teoranta are at present rationalising and closing down a number of their nursery operations and centralising them on the east coast?
I am sure the Deputy will realise that there could be circumstances in which it would be good commercial practice to rationalise and I do not see it as something the Deputy should feel obliged to criticise. The Deputy agreed that Coillte have a commercial remit and that they must operate in the commercial world.
Will the Minister ensure that Coillte operate in a cost effective manner? For instance, I am given to understand that the cost of planting an acre or a hectare by Coillte is greatly in excess of the cost of planting the same acre or hectare in the private sector. Indeed, it has been suggested to me that it could be double the cost. Is the Minister concerned that this might be the case and, if so, will he take any steps to ensure that this body will operate in a fully cost effective and efficient manner?
I am very anxious to ensure that Coillte operate in the most cost effective way possible to ensure that their operation is commercially profitable. It is my concern that any practices which might need to be attended to, which might be deemed to be other than cost effective, should be dealt with by the company. The Deputy can be assured that Coillte, who only commenced operations on 1 January, have been successful to date and they will have my full support in seeking to achieve the most efficient and cost effective methods available.
Did the Minister undertake to make financial support available to Coillte to tide them over the period before they will receive revenue from their timber stock? If he made such a commitment, has he honoured it? Will he agree that it is not fair to say that this is Coillte's commercial decision if the financial support on which they expected to operate is not forthcoming as expected?
The Forestry Act, 1988, made provision to enable the Minister to give capital grants, grants for current expenditure and working capital to Coillte to enable them to find their feet and to support them financially during the period until they achieved their commercial objective of making a profit, which it is planned to do in a number of years. They are on target and substantial sums have been made available to Coillte by the Exchequer in 1989. They received a capital grant of £15 million, a current grant of £3.855 million, a special grant to cover stamp duty liability of £5.75 million and agency payments of £1.059, making a total amount to Coillte of £25,654,000.
Will leaving Coillte Teoranta short in terms of cash flow make them excessively reliant on institutional commercial borrowings, which will inevitably concentrate on the maturing end of the timber cycle, thereby endangering something that was specified as socially desirable when the Act was passed, a full timber cycle commitment by Coillte Teoranta?
I do not accept the argument that Coillte have been left short of capital or funding. I am not aware of any requirement on the part of the board or the management in regard to cash flow problems. The Deputy should accept that this is a new company which are being helped by the Exchequer in their initial years and that they are proceeding satisfactorily in carrying out the task which this House has given to them. I know that all Members fully support the establishment of Coillte and will wish them every success in their endeavours. The House can be assured that I will carefully take account of the development and the requirements of Coillte and assist them in whatever way possible within the constraints that apply to the Exchequer.
Deputy Carey rose.
I have dwelt too long on this question. I am now proceeding to deal with Question No. 7.