I move: "That the Bill be now read a Second Time."
The purpose of the Forestry (Amendment) Bill 2009 is to increase Coillte Teoranta's statutory borrowing limit.
Forestry (Amendment) Bill 2009: Second Stage.
On a point of order, does the Minister of State have a script?
I have.
I am sure it will be circulated.
This Bill proposes to amend section 24(1)(b) of the Forestry Act 1988, which provides for borrowings by Coillte Teoranta for capital purposes including working capital.
Section 1 provides for an increase in Coillte Teoranta's statutory borrowing limit from IR£80 million — which is now approximately €101.5 million — to €400 million.
On a point of order, before we start the debate on this Bill, may I ask the Minister of State——
Is that a point of order or a speech?
No, it is a point of order. Does the Minister of State intend to move an amendment on Committee Stage to amend also section 25(2) of the Forestry Act 1988?
We are in the middle of a debate, Deputy, and that is not a point of order. By order of the House, we must conclude Second Stage by 1 p.m. I do not know whether it is possible to facilitate a couple of speakers, but the Minister of State may wish to reflect upon that.
I reserve the right to raise that matter later.
We will deal with that when we get to Committee Stage. There will be a Committee Stage because amendments have been circulated.
Okay.
I call on the Minister of State to proceed with his Second Stage contribution.
I will do my best to speak as quickly as possible, a Leas-Cheann Comhairle, as many Members wish to speak. They will not be able to do so, however, because of the votes and other issues. For the Deputy's information, I do not have an amendment on Committee Stage.
The Bill before us amends section 24(1)(b) of the Forestry Act 1988 in which the existing borrowing limit of IR£80 million is stipulated. The existing statutory limit was set in 1988, when the legislation providing for the establishment of Coillte was enacted, and has not been increased since then. Coillte has a significant capital investment programme each year, which includes reforestation, investment in forest infrastructure, and plant and equipment. It is necessary to increase the statutory borrowing limit to make adequate provision for the borrowing requirements of Coillte for its capital expenditure programme. Section 2 provides for the Short Title, collective citation and construction of the Bill and is a standard provision.
Coillte Teoranta is the national forestry company, established as a private commercial company under the Forestry Act 1988. The Act provides that the principal objects of the company are as set out in that Act. I will skip over those in order to allow time for others to speak.
Coillte currently manages 445,000 hectares of forest land of which 79% is forested with the remaining 21% encompassing open spaces, water, roads or land above the tree line. Such management includes maintenance of the forest estate, felling as appropriate and replanting. The company supplies logs to the timber processing industry, including sawmills, panel board mills and the emerging energy supply businesses. While the company provides direct employment, it also engages harvesting and haulage contractors thereby sustaining employment for a far greater number.
The company also owns two panel board businesses: Smartply in Kilkenny, which is close to Waterford port; and Medite in Tipperary, both of which I visited recently. These manufacture OSB and MDF boards respectively with over 80% of their output being exported. There are significant investments currently in train in both plants.
Coillte has entered into a joint venture arrangement with the ESB to develop a wind farm in Garvagh Glebe, Co. Leitrim. It is also important not to overlook Coillte's contribution to recreation by way of its Forest Parks and trails and its involvement in Lough Key Forest Park in County Roscommon.
The company now has an extensive remit. Colleagues in the Joint Committee on Agriculture, Fisheries and Food met with representatives from Coillte at the end of October to discuss the company's annual report for 2008, at which Coillte informed the members of its current structure and its businesses. I will not go into those elements at this stage.
The purpose of this brief outline of Coillte's business interests is to put in context the proposed increase in the statutory borrowings level for the company — or, in reality, the group — as the limit on borrowings applies to the aggregate at any one time of borrowings by the company and its subsidiaries. The limit on the company's level of statutory borrowings is currently €101.5 million. The business environment in which Coillte, as a commercial company, operates is vastly different from the business environment in which it operated in its earlier years.
There is a provision in the Act whereby Coillte may seek approval for temporary borrowings. Coillte has sought and received approval under this provision on a number of occasions over the last number of years. However, it is considered sensible to increase the statutory borrowing limit formally, rather than have any concern about the interpretation of the term "temporary" in the context of borrowings.
While it was generally accepted in principle that the company's statutory borrowing limit should be increased, there has been much consideration as to the most appropriate level. Inflation alone would allow an increase in the borrowing limit from €101.5 million to €182.5 million. This is based on inflating the €101.5 million limit in 1988 by Ireland's inflation rate up to October 2009.
Coillte has significant capital expenditure each year. In its annual report and accounts for 2008, Coillte states that its capital expenditure in 2008 was €58.1 million. It also explained that "a significant proportion of the expenditure was incurred in enhancing and maintaining the forest estate and expanding the road network within the forest". It added that the "expenditure also included a substantial investment in Medite Europe Limited that will increase production capacity and improve operational efficiency". The figure for capital expenditure in previous years was €58.4 million in 2007 and €49.4 million in 2006. This level of ongoing capital expenditure was a consideration.
Coillte has outlined its strategic plans to 2012 in its document, Destination 2012, to which it referred in its discussion with the joint committee. This document focuses on Coillte's four business areas and contains numerous proposals, including proposed investment in renewable energy, especially wind energy. The strategic plan requires in-depth consideration to which I will refer again.
With regard to determining the most appropriate level to which the limit should be increased, it was concluded that €400 million would allow Coillte sufficient headroom for core activities, working capital as well as approved investments.
With regard to the consideration of Coillte's strategic plan, the House is aware that under the new programme for Government, I am committed to reviewing State forestry policy to take account of its critical role with regard to climate change and its importance to construction, bio-energy, bio-diversity and its potential to deliver long-term employment in other downstream industries. The review will include the role of Coillte and its functions and operations. It will also assess the effectiveness of current forestry grant schemes and make recommendations on how best to deliver supports in the future.
Three working groups are being established to carry out the review, with each group assigned a specific aspect. The respective groups will review forestry grant and premium schemes; State forestry policy; and the role, functions and operations of Coillte. With regard to the review of the role, functions and operations of Coillte, the working group will also consider the Coillte strategy document, Destination 2012 to which I referred earlier. Pending the outcome of these reviews, my initial view is that Coillte, with its extensive experience in forestry management and knowledge of the timber market, has played a significant role in the development of Irish forestry and that it is timely to look at its role, functions and operations to optimise its contribution to forestry and the economy. I look forward to the output from the Coillte review group.
With regard to the proposal before us, to increase Coillte's statutory borrowing limit, it is important, in view of its current contribution to the economy by way of employment, both direct and indirect, and the export of its products, that Coillte be provided with the means to acquire adequate funding for investment in its businesses. There are also the numerous other benefits which we derive from Coillte's management of the forestry estate, such as carbon sequestration, biodiversity benefits and the provision of recreational facilities. I stress that an increase in the company's statutory borrowing limit does not automatically mean that the company may borrow to that limit. Under Section 24(1) of the Forestry Act 1988, the borrowings of the company require the consent of the Minister for Finance and the Minister for Agriculture, Fisheries and Food. When the company sends a request outlining its expected borrowing requirements, the request is closely examined by the Department and the Department of Finance and, if considered reasonable and soundly based, it will be submitted to the Ministers for consent. The level of borrowings is also reported to the Departments on a monthly basis. This requirement is in addition to the reporting requirements provided in the code of practice for the governance of State bodies.
Significant investment proposals also require the approval of both Ministers. With regard to reporting requirements, I draw particular attention to the requirement in the code of practice which states:
The chairperson of each State body must furnish to the relevant Minister in conjunction with the annual report and accounts of the body, a comprehensive report covering the group. . . outlining all commercially significant developments affecting the body in the preceding year, including the establishment of subsidiaries or joint ventures and share acquisitions, and major issues likely to arise in the short to medium term.
I take this opportunity to welcome the revised and updated code of practice for the governance of State bodies published by the Minister of Finance earlier this year. The reporting requirements, which it stipulates, and ongoing communication between Departments and agencies under their remit are vital elements in the oversight of agencies.
On a point of order, given the very limited time available for this debate and the fact that very few Deputies will have the opportunity to contribute to this debate, which is to end at 1 p.m. with five minutes allocated to the Minister to conclude, it is with reluctance that I call for a quorum.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
Investment in forestry has been a part of Government policy since the foundation of the State. This investment has contributed to a thriving wood processing sector which employs many thousands throughout Ireland, in both rural and urban areas.
The next part of my speech deals with COFORD and general issues of importance. However, in view of the fact I want to allow colleagues to have an opportunity to speak and that the delay was beyond my control, I will skip the next part.
On the role of Coillte in afforestation, when it was first established in 1989 the company actively engaged in land acquisition for afforestation purposes and expansion of its estate. In latter years, it has reduced its land acquisition programme for a number of reasons, including reduced availability of land for sale, rising land prices and the company's ineligibility for forestry premiums. Since 2000, the company has focused on contributing to the afforestation programme through its farm partnership schemes, by providing forestry services to farmers and by promoting forestry investment. Coillte is currently engaged with Bord na Móna in a joint venture to afforest cutaway bogs. The pilot phase of this project will commence next year with the planting of 200 hectares initially. It is proposed to plant up to 5,000 hectares over a number of years.
In the wider context, Coillte also has a pivotal role to play in renewable energy. Coillte is strategically positioning its forestry business and biomass resource to play an important part in contributing to the reduction in greenhouse gas emissions and climate change mitigation in Ireland. While much of Coillte's timber supply is destined for processing, the production of biomass for energy will still be significant for the company. The company is working with the key stakeholders, including the relevant Department, and has established a pilot depot in County Mayo. Coillte is also currently seeking to align itself with a leading technology company with demonstrable experience and a proven track record in the larger industrial biomass sector. Wind energy is also regarded as playing a major role in the achievement of the renewable energy targets.
I am sure members appreciate Coillte has developed significantly from the time of its establishment. I believe that for commercial and operational reasons, it is timely to revisit the level of statutory borrowings set down. As I said, the most appropriate level received a lot of consideration and €400 million was the amount considered appropriate at this time. I remind the House that agreeing to this increase does not mean that Coillte may automatically borrow to that level. The consent of both Ministers is required for the level of borrowings and requests will be the subject of scrutiny by both Departments. It is not envisaged that this proposed level will be sought in the immediate future. However, when it is being amended, it is important to provide for a sufficiently high level in the medium term. I commend the Bill to the House.
The manner in which this debate is being conducted in the House is an insult to the Minister and all sides of the debate. It makes a mockery of the requirement for due process. I would like to refer to the point of order made by Deputy P. J. Sheehan which questioned whether the Minister intended to move an amendment on Committee Stage to section 25(2) of the Forestry Act 1988. Deputy P. J. Sheehan has made a serious intervention because it questions the adequacy of the legislation as drafted. It highlights the dangers of rushing legislation through the House. It may be inadequate but I hope the Minister can assure us in that regard.
I appreciate there is very little time and I want to ensure Deputy Sherlock is allowed some. Therefore, I will just make a few short points. Coillte was before the Joint Committee on Agriculture, Fisheries and Food recently. It was an insult to the members, of all parties, that Coillte did not raise the matter of borrowing with us. It is a State-sponsored semi-State company, not a Government-sponsored semi-State company, with a commercial remit and it would have been appropriate for it to have raised these issues with us at the meeting.
Why is Coillte seeking €400 million? Did it seek a greater amount? What is the emergency forcing us to rush this legislation? Could the Bill not have been published earlier, thus having allowed us to do adequate research? Is it urgent? At the committee meeting, reference was made to the black hole in Coillte's pension fund. Does it want to borrow to deal with that?
Are all the borrowings undertaken by Coillte to date compliant with the existing legislation? Are all the other agencies within the remit of the Department of Agriculture, Fisheries and Food complying with their statutory borrowing limits? This raises some very interesting questions.
Let me refer to forestry in general. Since 1995, when 23,700 hectares were planted, there has been a dramatic decline in the rate of planting, to approximately 6,500 hectares in 2009. The target in the programme for Government is 10,000 hectares per annum. Coillte is a player in this regard. We are led to believe the target of 10,000 hectares could be achieved through an additional budgetary provision of €2 million. The ink is not dry on the renewed programme for Government, yet the figures contained in a reply to a parliamentary question by Deputy Crawford on the matter show how big the gap is. Forestry has a significant role to play in reducing greenhouse gas emissions but we are way behind the United Kingdom and elsewhere.
It is impossible to have a meaningful debate on this subject. I strongly object to the manner in which the debate is being conducted.
I am sorry the time is so limited.
I am prepared to cede half of my time to Deputy Sherlock.
Deputy Sherlock has four minutes.
I find myself in a ludicrous situation in that I must thank Deputy Creed for allowing me some of his time. If I may, I will allow some of my time to Deputy Ferris, with whom I was to share my time. Why do we find ourselves in circumstances where I have merely two or three minutes to discuss a princely sum that could potentially amount to €400 million?
I do not have adequate time to discuss the fact that the CEO of Coillte is being paid over €400,000 at a time when the subsidiaries under Coillte are completely under-performing, nor do I have time to analyse properly the Minister of State's speech, in which he states €1.89 billion, or just under 1% of GDP, is attributed to forestry. That figure is from 2008 but it will be reduced significantly in the future given that the subsidiaries are under-performing. I wanted time to discuss this in greater detail.
I also wanted to discuss the fact that the Forest Stewardship Council audited Coillte in 2006 and that this is not mentioned in the Minister of State's speech. The results of the audit cast a poor light on some of Coillte's practices that are worthy of consideration in respect of this Bill. I wanted to discuss the fact that Coillte is currently being audited by the Forest Stewardship Council. Will the Minister expound on that process?
If there is time, I will allow some to Deputy Ferris.
I understand the pressure Members are under. There are 45 minutes allowed for Committee Stage and, in the circumstances, I intend to be very lenient during the debate. I call Deputy Ferris.
How long do I have?
Two minutes.
I thank Deputies Sherlock and Creed for their generosity in sharing their time.
Forestry provides an alternative source of income for farmers who have land unsuited to stock or tillage. It can have an input into the production of alternative energy using biomass, woodchip and thinnings. However, despite some effort to encourage the planting of trees, the level of afforestation remains very low. In 2007, approximately 724,000 hectares, or 10% of the land area, was under forest. This compares with the EU 27 average of 42%, which is alarming.
The benefit of forestry, particularly to marginal land in the west and south west, cannot be stressed enough. In my county, Kerry, there are 33,000 hectares under forest, comprising 1,300 small forestry farms. The small size of the farms and the lack of necessary supports contribute to economic disadvantage in the area.
Last year, the Joint Committee on Agriculture, Fisheries and Food produced a report on farming in the west. One proposal made to the committee was that small farmers should pool their resources to maximise potential. This is the way to make progress.
The extent of afforestation in more marginal land demonstrates its importance. County Leitrim has the second highest afforestation density while County Wicklow has the highest.
I will be brief, although I ceded more than half my time to other Deputies. The circumstances they objected to were entirely beyond my control. We allowed over two hours for this debate initially but, for all kinds of reasons, that did not work out.
Deputy Creed asked if all the borrowing is legally compliant. I have been keeping an eye on this and am assured it is. Coillte would have preferred a considerably increased borrowing limit at this time but, because of all the other considerations, some of which were mentioned by Deputy Sherlock and others of which were mentioned by me in my initial contribution, we considered that €400 million was sufficient for the company's purposes at present.
Did Coillte consider it to be sufficient?
It will. I remind the House that there is a major forestry Bill in an advanced stage of preparation. I would have preferred to consolidate all the forestry measures in one Bill but this was not possible for a variety of reasons. That is why I decided to introduce this legislation, which is concerned merely with the borrowing limit of Coillte and consolidating existing temporary borrowings as part of approved borrowings. This is a sensible approach at this time although I would have preferred to have had the more comprehensive Bill, which I hope will be ready very early in the new year.
It is five years overdue.
The forestry regime in Ireland is considerably more attractive than that in the United Kingdom and elsewhere. The strategic review of Coillte and other matters will be better presented in the context of the more comprehensive Bill. The audit of Coillte by the Forest Stewardship Council and other matters we would have liked to discuss on Second Stage will be considered in the context of that Bill. Today I had only intended to address the borrowing limit of Coillte by increasing it relatively modestly and approving the sum in question as temporary borrowings although it would clearly have been far better to consolidate these as part of the main borrowing requirement.
Question put and agreed to.