Joint Committee on Agriculture, Food and the Marine díospóireacht -
Tuesday, 19 Nov 2013

Annual Report 2012: Discussion with Coillte

Vice Chairman

I welcome the representatives of Coillte, namely, Mr. Gerry Britchfield, acting chief executive and Mr. Gerry Egan, group director, strategy and corporate affairs. I thank them for their attendance before the joint committee to discuss with members the annual report for 2012. Before I begin, I bring to the attention of witnesses the matter of privilege. Witnesses are protected by absolute privilege in respect of their evidence to this committee. However, 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 qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice that where possible they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I again remind anyone with a mobile telephone to either turn it off of put it into silent mode please.

I now invite Mr. Gerry Britchfield to make his opening statement.

Mr. Gerry Britchfield

I wish to begin by thanking the Vice Chairman and members of the joint committee for giving us the opportunity to make a presentation to them today. Over the next 15 minutes or so, we wish to provide the joint committee with an overview of our business as it is today, to review the highlights of our performance in 2012, to preview the outlook for 2013 and beyond and to provide an insight into our future strategy for the business. Coillte has been granted stewardship over two valuable resources, namely, 7% of the land area of Ireland and a wood fibre basket of 2.5 million cu. m per annum. Our aim is to add value to these two resources for the benefit of the State through the five businesses in which we already have a strong competitive position. Our forestry and panel products businesses are focused on adding value to Coillte's wood fibre resource and our wind, telecommunications and property businesses are focused on adding value to Coillte's land resource. As members can see from the map on the third slide in our presentation, Coillte has a countrywide presence. It has plantations in each of the Twenty-six Counties in Ireland and it directly employs approximately 1,000 people. In broader terms, the forestry and forest products sector in Ireland contributed €2.2 billion to the economy in 2012 and employs approximately 12,000 people, primarily in rural locations.

Coillte is the principal supplier of logs to a highly efficient export-orientated wood processing sector, comprising sawmills and panel mills. Our forests are certified as being sustainably managed by the Forest Stewardship Council and have been for more than ten years. In 2012, we sold 2.3 million cu. m of round wood, primarily to the wood processing sector. Since the collapse of the construction sector in Ireland, our sawmill customers have transformed their businesses and now export two thirds of their output, primarily into the United Kingdom market while in contrast, in 2007 two thirds of their output was sold in Ireland. In recent years, Coillte has been working actively with its sawmill customers and Enterprise Ireland to promote Irish timber at the Timber Expo event in the United Kingdom. Over the past five years, the Irish sawmills have been highly successful, in so far as they have increased their share of United Kingdom market and have almost doubled it to 6.5% of the sizeable market.

Coillte also is an exporter of innovative and sustainable wood-panel products. It owns two panel mills, namely, SmartPly in Belview Port, County Kilkenny, and Medite in Clonmel, County Tipperary. These businesses employ 300 people directly and approximately 400 to 500 indirectly, most of which jobs are located in the south east. Our panel products are used in construction, packaging, furniture, flooring and a range of other uses. We export more than 90% of output to more than 32 countries across the globe via our sales teams based in the United Kingdom and the Netherlands. We see significant opportunities for growth in demand for our panel products due to the increasing focus on both the energy efficiency of buildings and the sustainability credentials of building products. Our panel businesses have a deeply embedded innovation culture and we have developed a strong pipeline of new products. In 2012, we were the winners of the supreme innovation award at the Timber Expo for our new waterproof medium-density fibreboard, MDF, product, which is called Medite Tricoya.

We are supporting the achievement of national renewable energy targets. By 2020, the Government's objective is that 40% of electricity generation will be from renewable sources. Due to the nature of our land bank - we have elevated sites with strong wind regimes and good road access - Coillte is playing a leading role in supporting the delivery of Ireland's renewable energy targets. We have a successful track record in the delivery of wind energy projects. We have a pipeline of more than 300 MW with full planning consent across Ireland, which has been developed over the past five to ten years. Moreover, we have been successful by taking a considered and measured approach to wind projects, founded on our strong track record in community relations. Our strategy is to develop our pipeline of wind projects in partnership with key industry players.

Three of our leading projects are co-developments with the ESB and a further one is a co-development with SSE. We are also a provider of sites, rights of way and wayleaves to a range of third-party developers in the wind energy sector. Over 20% of installed capacity in Ireland is on lands formerly owned by Coillte.

We are also connecting rural communities. We have been leasing land to telecommunications companies to host mast sites in rural locations for over 15 years. Our leased rental model reflects the intensity of the usage of a site by a telecommunications company. Our telecommunications business manages over 400 mast locations on the Coillte estates. Most of the masts are owned and maintained by the four mobile telephone operators - Vodafone, O2, Meteor and 3. In recent years, in partnership with BT, we have built over 100 masts in our sites to enable roll-out of rural broadband via the national broadband scheme. We also recently received planning permission for a new mast on Three Rock in Dublin which will result in the removal of three of the existing masts, which will consolidate onto the new one. We have also begun delivering fibre-optic capability to key masts in rural locations, the first being in Castlerea, County Roscommon, to enable the roll-out of next generation networks.

Coillte is also actively supporting the provision of infrastructure to enable growth and economic recovery. For example, in recent times our property business has sold land to Irish Distillers to enable it to increase its whiskey storage facilities near Midleton and to Grant and Sons in Tullamore to enable it to build a new Tullamore Dew distillery there, and we have recently signed an agreement with film and television location specialists, O'Carroll Mulhern Services, to market Coillte properties for film, television and event business. We also regularly sell small parcels of land to facilitate sporting and local community projects.

We not only deliver economic returns, but are Ireland's leading supplier of outdoor recreation facilities. We have 80 million visits annually to our 150 recreation sites across the country. We have ten forest parks, including the successful development in Lough Key in partnership with Roscommon County Council. We have constructed four national mountain bike trail networks, including a international-class trail in the Ballyhoura Mountains in County Cork. We support over 1,600 km of dedicated trails on our lands, many of which are leading waymarked routes such as the Wicklow Way.

We are actively supporting the provision of new tourism offerings for Ireland, for example, the Nephin Wilderness Project, which is a joint development with Mayo County Council and the National Parks and Wildlife Service, which was launched by the Taoiseach and the Minister for Arts, Heritage and the Gaeltacht, Deputy Deenihan, in May of this year, and the development of an interpretative centre and trail facilities at the Cavan Bureen Geopark, which is a joint development with Cavan County Council that we launched in August 2013. Some 20% of our estate is managed primarily for biodiversity and nature conservation. In total, we are providing public goods for the Irish people with a value estimated at €500 million per annum.

We were proud in June of this year to receive external validation for our performance when we overcame tough competition from other exemplars of best business practice across Europe. In all, there were 15,000 participants across ten different categories and we won the European Business Award for Environmental and Corporate Sustainability. According to the judges, Coillte shone across the board in its dedication to sustainability, the environment and its local community. It was seen as an innovator in new products and also demonstrated strong leadership in delivering positive results across its social, economic and environmental objectives. The judges went on to state that this year's winner has shown an impressive commitment to ensuring that the environment it owns is not only protected and preserved, but open to everyone in the community to enjoy. We were particularly honoured to be recognised in this category as environmental and corporate sustainability is at the heart of who Coillte is and what we do. I have worked in Coillte for 21 years. The people of Coillte, through their behaviour day in, day out, sustain and build on these high standards of environmental and corporate sustainability. They believe in it and have built it in to the fabric of what we do.

I will turn briefly to the 2012 highlights. In terms of our financial performance, we delivered an operating profit before exceptional items of €35 million in 2012 on turnover of €262 million. We believe that it was a good result in the context of the five or six years of recessionary market environment that we have been through. We paid a dividend of €2 million to the shareholder in 2012.

We exported, as I stated, our wood panel products to over 30 countries. We launched a number of new products, not only Medite Tricoya but also an OSB product called ToughPly which is a substitute for non-sustainable tropical plywood. We also celebrated ten years of FSC certification in 2012 and we planted 15 million trees on approximately 6,000 hectares of reforestation in 2012. In terms of conservation, we won not only the European Business Award but, closer to home, the RDS forestry award for our leadership in nature conservation.

In terms of the outlook for 2013, we are confident that we will deliver an operating profit similar or slightly better than that in 2012. Markets for our panel products and our customer sawn wood, particularly in the United Kingdom, have shown a marked improvement in the second half of 2013. The United Kingdom housing sector is showing signs of recovery and this is positive for our business as we look forward into 2014.

During the economic downturn, we have significantly reduced our cost base. We had to do that in the face of a difficult economic environment. Our head count has fallen by 25% over the past five years. Our operating costs have been reduced by €40 million per annum and we have exited a number of businesses that were non-performing and that we could not make profitable. We have also significantly enhanced our innovation capability over those years and that is now reaping dividends for us. These achievements combined with our strong Medite and SmartPly brands, and excellent routes to market, means, we believe, that we are well positioned to turn to a strong-growth path as our key markets recover.

We firmly believe that Coillte is an organisation that has never been more relevant. In a world that is placing ever more value on environmental and corporate sustainability, we believe that Coillte displays good credentials in this space, as evidenced by our recent win in the European Business Awards and our ongoing FSC certification.

We have stewardship of two valuable resources - 7% of the land area of Ireland and a wood-fibre basket of 2.5 million cu. m per annum. We play an important role in society. We provide extensive recreation facilities for people to enjoy and deliver a wide range of biodiversity benefits for Ireland, and we are supporting economic recovery via our export driver - exporting to over 30 countries last year.

Turning to the future, the priority for Government is for Coillte to deliver a material financial dividend to the State on an annual basis and our core objective is to implement a restructuring and growth strategy within Coillte over the next five years that will enable us to deliver an annual financial dividend of circa €20 million to the State by 2018. It is focused on these two overriding objectives of adding value to the wood fibre that we own and adding value to the land bank.

Our strategy is to be building on our key strengths - our impeccable environmental and sustainability credentials, the scale of our land assets and our strong market share in key markets, such as the United Kingdom - but will also demand that we enhance our existing capabilities, particularly in the innovation space, and build new ones such as strategic marketing which we will need for the future. We will deliver our strategy through five businesses where we already have a strong competitive position: forestry and panel products, in terms of adding value to fibre; and telecommunications, wind and property development sales, in terms of adding value to our land.

The strategy is focused primarily on improving operational performance and adopting new market positions in businesses and in geographies we already know well. We believe our strategy is credible and we are confident that we can deliver it because we have spent many months on rigorous and comprehensive analysis of the markets, customers and supply chains. We believe that most of the key drivers of successful implementation are within our control and we have taken a conservative approach to assumptions that are not, and we believe our assumptions are grounded. We think we have a good track record of having, I suppose, faced adversity for the past five years and taken our cost base down. We think that we have a good platform for delivering growth in the future.

Following on from the Government decision in June 2013, Coillte and Bord na Móna, together with NewERA and the relevant stakeholder Departments, have been working in recent weeks to evaluate the prospects for a beneficial merger of the two companies. This work is focused on assessing the financial benefits, costs, risks and issues associated with a full merger of the two companies. The financial benefits on which we are focusing on identifying derive from overlaps between our businesses, and are over and above those flowing from implementation of the respective companies' business strategies. Whether a full merger is initiated by Government or not, we believe the delivery of our strategy will remain a key imperative for us in order to optimise the value to the shareholder of the wood fibre and the land in Coillte's stewardship.

That brings me to the end of our presentation. I hope the members have found it interesting and informative and now have a better understanding of why we believe trees are just the start of what Coillte has to offer the State. We will be delighted to take any questions that the committee might have.

Vice Chairman

I thank Mr. Britchfield. We will take the questions of three members at a time, beginning with Deputies Ó Cuív, Ferris and Pringle.

Deputy Éamon Ó Cuív

I thank Mr. Britchfield for the presentation. As he knows, I have much time for the work of Coillte Teoranta. It is worth recording here that the forestry industry, not only in the form of Coillte, has performed exceptionally well in the context of the downturn of the economy, having turned a 70% home market into a 70% export market. I do not believe any major timber-processing operation in the country has been lost since the downturn.

There have been many stories about land and forests being sold by Coillte. The committee needs information on how much land has been sold. How much of it has been sold in small parcels? I am very much in favour of Coillte's policy of facilitating communities with very small parcels of land for community centres, community facilities, playgrounds, etc. I do not know if any member of the committee would disagree with that, as most people would say the policy represents good neighbourliness. I am interested in knowing the method by which commercial parcels are sold and how they are valued, because they are State assets.

How much forestry has been sold as viable forest? Can the delegates confirm that no forest crop has been sold? One could sell the land, the forest and the whole lot. Could the delegates confirm that no forest crop or harvesting rights have been sold in circumstances in which the land was retained?

Is there research on added value associated with timber products? On the few occasions I visited timber-producing areas in Germany and elsewhere on the Continent, I noted the forestry authorities seemed to do an awful lot through small logging operations, thus producing smaller products and added value. While we have really moved ahead with stress testing, kiln drying, and getting good commercial products on the market, which is fantastic in that it results in the very successful production of a bulk product on foot of continuous investment, I noted abroad that there seems to be a lot more timber use generally, including for decking and garden features. In the main, this does not result in high timber values but it produces an awful lot of added value in terms of employment, etc. Is there research on how we could make our timber suitable in this regard?

Much work has taken place on rural recreation. Over the next three or four years, what will Coillte be developing in this regard? There was a big drive involving cycleways, mountain bike trails and walkways. What is the next big drive in regard to rural recreation? Is there a plan for the period 2014 to 2017?

Mr. Britchfield stated that the profit was €35 million. How much of this pertains to sales of land or non-trading profits?

Are there plans for acquiring more land for planting? While there seems to be a policy of holding on to what we have, there seems to be no policy to increase the area of State forest. Achieving this represents the cheapest form of forestry growth, because there is actually no Exchequer input.

While it is nice for the Government to get a dividend, making maximal use of the lands for the people in every way would result in a better dividend in the longer term if the industry were creating employment and so on. The dividend is so small that it does not make a significant difference to the Exchequer. Therefore, if some of the money were reinvested by Coillte, would it be able to create more jobs, generate more activity and develop further?

How much of an overlap is there between Coillte and Bord na Móna? Are they two State bodies with two totally different core businesses that happen to have land on which some might wish to locate telecommunications masts or infrastructure for generating renewable energy? Is this just the opposite to setting up quangos? Is it a question of getting rid of quangos for the sake of making absolutely nominal savings, perhaps of €100,000 or €200,000 per year, at the risk of losing the focus on the core business?

Deputy Martin Ferris

I thank the delegates for their presentation. There has been considerable concern in this House and outside over the future of Coillte or parts thereof for some considerable time. I can never seem to get a full answer to the question of whether Coillte has carried out a complete survey of the minerals contained in the lands it owns. Would it be fair to say that they are in the ownership of the State and will continue to be in the ownership of the State?

Mr. Britchfield stated that Coillte wishes to build on its key strengths. He stated that 15 million trees were planted on approximately 6,000 ha. in 2012. Does Coillte intend to continue to plant at this rate or to increase it? I assume this planting capacity is one of its strengths. Could the delegates elaborate on this and other strengths?

A target of 450 million has been set for 2018. Is this realisable? What support does Coillte need from the public purse in order to achieve that objective?

Deputy Thomas Pringle

I did not see in the presentation any reference to wood biomass as a potential growth business. I believe wood biomass will have a very key role as an asset for the State. It should be part of Coillte's renewable energy policy. Could the delegates outline their plans for wood biomass?

The presentation referred to renewable wind energy. It was stated that much of the energy is generated on land formerly owned by Coillte. That the land is formerly owned by Coillte is the crux of the issue. If land is being disposed of in this way, is the policy very short-sighted? When one disposes of land, one might get a windfall gain in the year of disposal but the potential for future growth to the benefit of the people is certainly diminished in the longer term. Is that company policy, and will it be company policy in the future?

Mr. Gerry Britchfield

On the question of how much land has been sold by Coillte, I will revert to Deputy Ó Cuív with the exact numbers as I do not have them here with me. In general, we typically sell a couple of hundred hectares per year, perhaps 200 ha to 300 ha. In the context of our estate of 450,000 ha., that is a relatively small part. What we are doing is focusing on areas that can deliver significant value over and above forestry. Our condition in considering whether to sell land involves our deciding whether it has a value in respect of another use that is significantly greater than the forestry value. Therefore, it is a question of deciding whether that value could be captured for the State by selling the land.

Since Coillte was established back in 1989, we have acquired about 60,000 hectares of land. In total we have sold around 14,000 hectares since being established in 1989.

Mr. Gerry Egan

This is our 25th year in business. Over that quarter century we have increased the estate by a net figure of 50,000 hectares.

Mr. Gerry Britchfield

It is 46,000 hectares or thereabouts. That is the increase in the net area of the estate through acquisitions, less areas that we have sold. The vast majority, or a significant proportion, of those sales relate to infrastructural projects. For example, when Ireland was building its motorway network we were often on the line of that road and sold lands under CPOs and other mechanisms to build them. At least half, if not more, of what we sold over that period related to infrastructural projects, including roads, or at least projects such as the Irish Distillers deal to support economic growth.

Vice Chairman

There is a vote in the Seanad.

Deputy Éamon Ó Cuív

Could Mr. Britchfield confirm that Coillte has not been selling forestry as forestry? In other words, 200 hectares here or there, in the greater scheme of things, are probably in multiple sales.

Mr. Gerry Britchfield

Yes. We are talking typically about 40 or 50 transactions per year.

Deputy Éamon Ó Cuív

I personally have no problem with that. I know that Coillte sold the odd bit of land around Cong and was very much in favour of that. It also provided land for the community centre, but Coillte is not selling forestry. There have been a lot of stories about Coillte selling significant forests as forestry.

Mr. Gerry Britchfield

Certainly in the past we have sold some lands to IFUT, the Irish Forestry Unit Trust. Since the State made a decision that it wanted to examine the sale of Coillte's harvesting rights, we have not sold any lands in mature forests to any third parties. We would sell small pockets of land within a total of 200 or 300 hectares per year to farmers who want to extend their holdings. We would therefore sell 10 or 20 hectares of forested lands to farmers, but in recent times we have not been selling large tracts of forested lands to pension funds. We have not done it since the Government made a decision that it wanted to examine the sale of Coillte's harvesting rights.

Mr. Gerry Egan

The Deputy had a supplementary question about the governance of the sale of property and how prices were struck. It is important to set it in the legislative context. Coillte's founding legislation is the Forestry Act 1998. Section 14 of that Act requires the company to agree annually with the Minister a programme for the sale and acquisition of land and the sale of timber. That means that annually we must agree an overall programme, so all timber and land sales - and the acquisition of land that might take place, which is a rare occurrence now - is done within the context of a programme that is overseen by the Department.

When it comes to individual sales, typically somebody - or it might be a local authority - will approach us to say that they are interested in a particular project. We will then have the property independently valued. We have a governance committee within the organisation that confirms the price that is being offered. It is either sold by tender or through negotiation by a local auctioneer. The internal governance committee ensures that at least the reserve price, or the independent valuation, is reached. If sales exceed a certain limit, which is €2 million, the approval of the board is required. There are some strict forms of governance in place even for small transactions.

Mr. Gerry Britchfield

The board is made aware of every sale of land we make and it notes that at each monthly board meeting.

Moving on to the next question, which was about adding value to timber products, some of our own sawmill customers have been quite innovative in recent years. I am not as familiar with what they are doing, but I know what our panels business is doing. We are focusing on adding value to the small-diameter fibre we use in those businesses. We have an active innovation pipeline and, typically, at any particular point we have a dozen products to examine. We have brought at least three or four to market annually in recent years. We are looking at opportunities, including the off-site construction sector, which is growing across Europe on the back of a requirement to have much more energy efficiency built into homes and office buildings. We are designing products that will suit the off-site construction requirement.

We have an active innovation programme in our panels business which, until recently, was supported by Enterprise Ireland. We are in a hiatus with EI at the moment, as we have come out of one programme and are seeking to work with it again in terms of grant aid for our follow-on programme.

Mr. Gerry Egan

As regards what our sawmill customers have done, the Deputy alluded to the success of our customers in reorienting themselves towards export markets. People may not fully appreciate that in 2006 we built 90,000 houses and apartments in Ireland. We did not necessarily finish them all, but 90,000 were built. Today we are building about 8,000 units per year, yet we are producing more timber now than we were in 2006. That has all had to go somewhere.

This committee may often hear from people in the food industry about the huge success of food exports. Proportionately, however, our customers in the sawmill sector have achieved more than that. For them to be able to succeed in those markets, huge investments have been made by progressive businesses. All the timber now exported from Ireland is planed, so there is no rough-sawn timber any more, and it comes in multiple lengths. I would encourage members of this committee to visit some of these places to see the state-of-the-art machinery installed, as well as product and market developments. That has happened because those customers have had the security of knowing that the supply is available and will be brought to the market as demand increases.

It is great for us to have an opportunity to pay tribute to our own customers and their achievements. We keep talking about an export-led recovery and we now have a €2.3 billion forestry sector whose technology and marketing techniques are ultra-modern. It is playing a major economic role, albeit an unappreciated one, especially in rural areas.

Mr. Gerry Britchfield

As regards what rural recreation projects Coillte is developing, one of the key things we are focusing on is the wilderness area in the Nephin mountain range. We see that as a great opportunity to build a new type of tourism attraction for the west of Ireland. We are working closely with the National Parks and Wildlife Service and Mayo County Council to bring that project to fruition.

We hosted a wilderness conference in Westport earlier this year, which was attended by 40 or 50 people, including pre-eminent experts in wilderness development across Europe. We see that as being a good way of attracting a different type of tourist to Ireland - people who want to get away completely from the urban world.

We have a policy of working closely with local authorities. The one I instanced is Cavan County Council, which wants to develop a geo-park in the Cavan Burren.

It is a UNESCO recognised site. We are working with the organisation to develop an interpretative centre and trail facilities on the site. Over time, this could be an anchor tourism facility for that part of the world. We are open to working with county councils and other agencies which have significant ideas for the tourism sector to help bring them to fruition. We see Coillte’s land as playing a key role in the development of rural recreation facilities.

Mr. Gerry Egan

I have the privilege of being the chairman of Lough Key Forest and Activity Park, a joint venture with Roscommon County Council established six years ago. We have just had a record year with over 55,000 visitors to the park. That is a good example of a local authority seeking a significant tourism attraction in the county which was supported by Fáilte Ireland through a capital provision. We had land available in the park which we were able to provide. It has proved to be a robust model providing local employment and spin-off benefits for adjoining towns. This is an example of how co-operation between different types of State bodies can deliver those significant benefits.

Mr. Gerry Britchfield

In the 2012 accounts, €6.7 million of the €35 million operating profit was from the sale of tangible fixed assets, mainly land. Coillte would like to acquire land for future planting, as we did through the 1990s when we acquired 60,000 hectares of which the majority was planted. However, we are in a weak competitive position in the market because from 1996 we were barred from being eligible for forest premia. As a result, it is difficult for us to compete for bare land in the marketplace. We have focused instead on reforesting the land we clear-felled.

In the recent past, we have entered into partnerships with farmers to plant their land and work with them to bring their crops through the clear-fell cycle. We have up to 10,000 hectares in farm partnerships. We are not planting bare land, however, but reforesting what we clear-fell as we are required to do under the Forestry Act 1946.

In accordance with our strategy, if we can grow our business, we can create and protect jobs in rural areas. The State, the shareholder, has said it wants a dividend from Coillte. We have no problem with that as a shareholder is entitled to a return on its investment. However, I believe we need to grow the business to put the company in a position where it can pay a substantial dividend. At the moment, it is only paying €2 million.

Deputy Ó Cuív asked if there was an overlap between Coillte and Bord na Móna. The two companies operate businesses which are significantly different. Coillte is in forestry, panel products, wind, telecoms and property sales, while Bord na Móna is in peat extraction, power generation from peat and biomass, peat briquettes, horticultural peat products, oil and coal distribution, waste recovery and wind. We have worked closely with it and NewERA to identify a small number of overlaps between the companies which could bring benefits for the shareholder. When one is looking for synergy, one has to have common customers, common routes to market or common products. We do not have that many of them, so there are a small number of overlaps such as wind energy. We completed our analysis of the benefits and risks of merging these overlaps by 1 November which we submitted to NewERA. It will prepare a report for the Government on the matter by 6 December.

The State has ownership of all mineral resources such as oil or gold. Several years ago, Coillte undertook an exercise to review sand and gravel deposits on its lands, particularly at the height of the building boom. To my knowledge, however, there has been no other extensive review of mineral deposits on our lands.

When we replant our lands, we manage them in line with Forest Stewardship Council Ireland principles. We regard forestry as one of our company’s key strengths. We have many talented and experienced and dedicated people working in the forestry part of our business.

Deputy Martin Ferris asked if the €450 million value uplift by 2018 is achievable. This figure was calculated by taking today’s cash flow and projected cash flow as we grow our business. We believe it is achievable and is a function of the strategy we want to deploy. We would not need to dip into the public purse to do this. It will be financed from our own resources, assets and some bank borrowings.

We are involved in the biomass sector and have a particular focus on renewable heat. Coillte entered into several contracts in this regard over the past several years with Astellas, a pharmaceutical company in Killorglin and the Radisson Hotel in Letterkenny.

We have also been very active in promoting the concept that we need a better incentive for renewable heat in Ireland. We do not believe the current refit supports for combined heat and power biomass are strong enough. The fact that there has been very little activity in combined heat and power in Ireland on the back of the State supports under refit is probably proof of that. When one factors in the cost of building these combined heat and power plants and the operating costs, the reality is that they cannot afford to buy the fibre based on the supports that are there. We have been working and will make our views known to the Department of Communications, Energy and Natural Resources about the need for a better incentive for renewable heat, which is where we see the big value for Ireland. Renewable heat can give one an efficiency of 80% or 90% in terms of bang for one's buck for the fibre as opposed to pure power generation where one might only get a 40% return efficiency. We think renewable heat is where it is at because that is where one can really add value to fibre.

Mr. Gerry Egan

To elaborate on that, there is a huge appreciation in the forest product sector of the use of biomass for renewable heat because it is far and away the biggest user and has been for very many years. All the sawmills that have kiln drying facilities burn their own sawdust to generate heat as part of the drying process. We would be a big user of biomass in our Medite plant. We use it in any number of different forms. We bring in bundles of brash and bundles of branches from our own forests that we use as a fuel. We use recycled wood and sawdust as boiler fuel so in one sense, the committee is speaking to the converted in terms of the value of wood for biomass. We have a very clear view that the real value of using wood fibre in the energy sector is for heat applications rather than for electricity general applications where wood is inherently inefficient.

The other use of renewable heat is firewood. We have seen an explosion in the demand for firewood over the past number of years where people have moved away from oil, particularly in rural areas where open fires have come back into fashion. One really good example that is worth talking about relates to one of our customers in the North called Boyd Bedding. It uses wood fibre in two really innovative ways. It has a very big export business where it takes relatively low-value pulp wood and makes horse bedding out of it for export to places like Dubai and Qatar for Olympic show jumpers and grade one racehorses. It has now entered into a significant contract with us to heat its entire processing operation also using relatively low-value pulp wood from Donegal. Going back to the innovation agenda, there is a considerable amount of activity happening below the radar where people are all the time looking at added-value ways of taking what is a fairly basic commodity and seeing whether they can add value and jobs to that.

Mr. Gerry Britchfield

Deputy Pringle referred to the fact that we made a comment that over 20% of the installed wind energy capacity in Ireland is on lands formerly owned by Coillte. That reflects our past policy. Our current policy would be to take the wind sites we have and develop them in partnership with others. As I said earlier, we have a number of sites that we have been developing over the past five years or so which are now almost ready to be brought to market and built out. We are proposing to develop those in partnership with people like the ESB. In terms of our past policy, as the committee is probably aware, wind energy sites take a very long time to come to fruition. In terms of the 20% of installed capacity, our policy in the past would have been to work with people who were expert in this area. I recall people like SERGAS who would have been in the market at very early stages and would have bought land from us to develop wind farms. That was a past policy but it still delivers a significant amount of capacity for Ireland in terms of reaching its renewable energy targets. Today, we are looking to capture more value by bringing them through the process to where they are actually viable and potentially operational wind farms in partnership with people in the business.

Deputy Willie Penrose

In respect of the wind energy proposals, has Coillte entered into agreements with companies in the midlands as a pre-emptive measure without taking cognisance of the fact that there was going to be a strategic environmental assessment? Why would Coillte do that given that there is a significant amount of opposition, particularly where they are located close to residential and rural areas? Surely Coillte could have awaited the outcome and not engaged in that process in a piecemeal fashion, which has caused great angst, disturbance and distress to people. If that is the position and I am led to believe it might be, I totally disagree with it. That was a poor strategy to adopt, particularly in the face of significant issues arising for people who had expended significant amounts of money purchasing their homes. Has Coillte made submissions to the local authorities to retain the current guidelines in terms of the wind energy proposals? Surely it should have taken cognisance of the issues that are arising that are manifest across the general populace and the level of distress these things cause.

Coillte is planting about 6,000 hectares per year. What potential is there to increase that? Mr. Egan compared it to 2006, which is perfect. Coillte made a significant contribution to the export-led recovery, which we ought to acknowledge, but surely it is unlimited in terms of what it can contribute in the future. Surely there are opportunities there in that regard. Coillte has acquired about an average of 2,500 hectares or thereabouts per year over the past 25 years. Has it become dormant in that position or is there a possibility that Coillte can re-enter that market and continue that process because many of us worked hard to ensure that Coillte was not sold off under the terms of the troika agreement? I hope the significant confidence invested in Coillte will be repaid in the way we all anticipate.

Coillte has lands in rural areas that are down minor roads and local road networks. Very often, in the process of extracting the timbers, significant damage to local roads occurs. Does Coillte co-operate with local authorities in making a contribution, particularly where people live along those roads, to ensure they continue to have the appropriate access to which they are entitled? There might be isolated numbers of people living there. Does Coillte still co-operate with local authorities to ensure that roads are maintained to that standard? I know Mr. Britchfield is only acting CEO but has Coillte now complied with Government guidelines in terms of public sector pay for CEOs?

Deputy Martin Heydon

I thank the gentlemen for their presentation. I apologise as I had to step out for a few minutes. I hope I do not ask questions that have been asked previously. Towards the end of his presentation, Mr. Britchfield referred to sustainable value for sustainable living. Mindful of the area of renewables, has Coillte undertaken a cost-benefit analysis of the use of the wood by-product in its manufacturing of panel production compared with its use in the generation of renewable energy? The climate change strategy is becoming more and more prevalent. Has Coillte developed its own climate change strategy regarding land use and forestry in conjunction with the national climate change strategy?

Deputy Michael McNamara

Mr. Britchfield referred to the requirement on Coillte to reforest areas that have been felled. That would obviously include areas that have been felled but are largely unproductive or are unsuited to forestry. I am aware of a number of areas in Slieve Aughty which were planted in good faith in the 1960s but which have not been felled because the growth is too poor. From an environmental and visual perspective, the areas would be better off had they never been planted. It is uneconomical for Coillte to fell the trees in these areas and, furthermore, they would have to be replanted. Is the area of law to which Mr. Britchfield referred something the Government should be considering in the context of forestry legislation?

He indicated that the supports for CHP plants are insufficient and that it is uneconomical to pay for the fibre. Correct me if I am wrong but I understand Coillte refuses to enter into long-term supply contracts. I am referring not only to finished timber which can be used for construction but also to thinnings. In the absence of guaranteed supply, no investor will establish a CHP plant. Coillte is supplying bioenergy in some instances. Are these Coillte's plants or is it providing thinnings and raw material? Has the company considered signing supply contracts that would enable communities with a significant Coillte presence, such as in County Clare, which is one of the most afforested counties in Ireland, to establish CHP plants?

Mr. Britchfield skirted around the issue of mergers with Bord na Móna. He told us considerably less than has been published in last Sunday's newspapers. The Sunday Times reported that the idea is being scrapped because Coillte is unhappy with the proposed cost saving measures. The Sunday Independent reported that Coillte's former CEO, Mr. Gunning, claimed to be owed money by the company even though he earned €498,000 per year. There is a perception that Coillte has been selling land to pay for ongoing expenses, including exorbitant salaries for upper management, for many years but has managed to hide it in its accounting system. It has been suggested that it is a loss-making operation and that its model is entirely unsustainable and in radical need of overhaul. Bord na Móna is already a fairly unsuccessful company but next to Coillte it looks like a good operation. I appreciate that Mr. Britchfield may not wish to comment on media leaks but I expect more detailed answers to my first questions.

Senator Mary Ann O'Brien

I ask Mr. Britchfield to speak about Coillte's business margins, particularly in regard to 2010, 2011 and 2012, and the projected margin for 2013. What were the gross net margins? I am trying to supplement Deputy McNamara's question. Mr. Britchfield's presentation was beautiful but I would have liked more meat and figures that bang it home to us that the company has been run in a cost effective and lean manner, and that the margins are sustainable.

Mr. Gerry Britchfield

I will start with Deputy Penrose's question about wind energy. The backdrop to the question is that the Government has identified an opportunity to export wind energy and has signed a memorandum of understanding with the UK Government on developing an export opportunity of at least 2 GW, most of which will be located in the midlands. We have endeavoured to position ourselves in a way that ensures the State will benefit from that opportunity via the lands that we own. We have an option agreement with one developer in the midlands, Element Power, which is seeking to develop a number of sites as part of this export opportunity. We are also working closely with Bord na Móna in respect of 4,000 ha we have leased from the company. Bord na Móna also has significant ambitions in terms of being part of the wind export solution. We are discussing the potential for working together to develop these opportunities.

On the question of whether we are putting the cart before the horse by entering into the option agreement before the guidelines are specified, our option agreement with Element Power clearly states that the latter has to meet certain performance parameters. The company will have to go through the process of applying for planning permission under whatever guidelines are in place. The Minister for Communications, Energy and Natural Resources is currently finalising how this will be progressed and his Department will be issuing guidelines on how it wants the project to develop. Element Power will have to comply with that process. It will have to go through the normal planning process and if it cannot get planning permission because the planning authority deems its application to be unsuitable, the option agreement will fall over. There is no longevity in it. The company has to deliver in the context of the rules set by the Government. Our objective is to ensure the lands we hold are part of the solution that the Government wants to implement in regard to this export opportunity.

In regard to whether we have made proposals to retain the current guidelines for wind energy plants, we have made a submission as part of the normal consultation process. We advocated that the current guidelines, which were published in 2006, are sufficient in taking account of the relevant planning parameters. However, it is for the Government to determine the planning guidelines it wants to put in place and we will have to comply with them.

In terms of increasing the levels of planting, we are keen to plant trees. That is the core of what we do. We are mainly focused on reforestation because our inability to compete for land means we are effectively locked out of the afforestation market. We are not entitled to the forest premia which farmers have earned since 1996, with the result that we cannot compete in the agricultural land market in the way we did in the 1990s. The economics do not make sense for us to buy land at agricultural prices. We cannot make it work commercially to plant land in the absence of the premia.

Mr. Gerry Egan

The question about Coillte doing more afforestation is interesting in the context of Food Harvest 2020, which aims to increase beef and milk production. Afforestation is happening at a rate of approximately 7,000 ha per annum, with the support of annual Government funding of €100 million or €110 million. The thrust of government policy is that afforestation should be led by the private sector, namely, farmers who already own the land. While I understand why people expect Coillte, as the State forestry company, to do more afforestation, the policy keeps us out of that area and the incentives are directed towards other actors.

The clear message we are receiving from our shareholder Ministers is that, rather than necessarily investing money in that way, they would prefer to see proceeds from our business operations going back to the shareholder in the form of an enhanced dividend. From a policy point of view we are trying to square those different circles and ultimately fulfil the very clear objective we have been given from our shareholder, which is that a significant improvement in commercial performance, as per the Senator's question, in the form of a material dividend. It is on that aspect of our commercial performance that the company is focused.

Mr. Gerry Britchfield

There was a related question about whether we are dormant in terms of land acquisitions. We are with regard to new land; we are not acquiring new land. Regarding confidence that the faith that has been placed in us will be repaid, we have a very good strategy and excellent people working in the business who understand it very well and are extremely committed to it. The confidence that has been put in us will be repaid over the next number of years.

The Deputy also asked about damage to local roads from harvesting and consultation with local authorities. Local authorities over the years have become stricter in terms of designated access routes for harvesting. We are in constant consultation with local authorities about what access route we can use to access clear-fell sites. They lay down strict guidelines on what they expect, and we comply with those. We do our utmost to ensure we do not damage local roads because we appreciate that it is very disruptive for people living in those areas. Ultimately, we have to get the timber out, we use the most modern methods possible to do that and we have regard to ensuring we minimise any damage.

The Deputy asked about the Government's guidelines for CEOs. I am the acting CEO. Up to this I was the managing director of the panels business. When the previous CEO left, eight months ago, the chairman asked me to take up this role. I have done that under the same terms and conditions I was on before that with no improvement and they are consistent with the new government guidelines for the new CEO of Coillte.

Deputy Heydon asked about the cost-benefit analysis. We did a big exercise on this. As the Deputy may be aware, over the last number of years we have been examining reinvesting in our SmartPly facility in Waterford, and we recently went to the Government seeking approval to do that. We are hopeful that we will get approval to do that. The SmartPly business has a great future. In considering that investment, our board demanded that we examine all the alternatives, such as panels and renewables, to see which would provide the best return for our wood fibre. We did that, and it is clear that there is a better return for the State from using our wood fibre to manufacture the SmartPly product and export it.

That business has a great future. Part of that comparison relates back to the fact that the supports for combined heat and power, CHP, in Ireland are not particularly attractive. CHP bioenergy cannot match the sort of returns that panels are delivering. The panel sector is deeply rooted here. We have great expertise in this country and it employes more than 300 people directly in the south east and approximately 100 in Carrick-on-Shannon, so it is a very important business.

The Deputy asked us about climate change strategy and land use. We are mindful of the fact that the carbon sequestration benefits of forestry were built into the Government's plan for meeting its Kyoto targets, which took us to 2012. As part of our business we ensure that we replant areas that we clear-fell. We are mindful of the fact that carbon sequestration is a key benefit of forests and ensure that we replant forests to avoid diminishing that carbon sequestration benefit. We seek, through Coillte's forest business, to improve the yield class of what we replant if we can. The yield class improvement generally gives a better carbon sequestration return.

Deputy McNamara asked about the areas that are largely unproductive and that we are replanting if and when we clear-fell them. There is a case for looking at areas that are particularly poor and rather than reforesting those sites with a full stocking level of 2,500 plants per hectare, which is what we tend to do, going for a less intensive stocking level because the economics are very poor. Many of those areas would not be grant-aided by the forest service if they were bare land today because their yield class would be far lower than what it would regard as a commercial prospect. We must examine this, but it is a policy issue for the forest service. Its policy is to encourage people to replant and restock at full stocking levels.

Deputy Michael McNamara

Would it require legislative change to clear-fell them and leave them fallow?

Mr. Gerry Egan

Yes. The legislation that governs the harvesting and replanting of these areas dates from 1946. In the post-war era the object of the exercise was to stop the trees from being felled rather than enabling it to be done on a sustainable and commercial basis. The general proposition in legislation, with some exceptions, is that if any area is felled it must be replanted. As members will know, there is a new Forestry Bill on Second Stage, and this is an opportunity to introduce a more flexible regime in terms of some of these areas. Mr. Britchfield referred to the Nephin wilderness area in Mayo, where there are 40,000 hectares which should never have been planted in the first place. Rather than trying to manage such areas for commercial timber production we are looking to see if there is a tourism, recreation and nature conservation benefit to be had from that.

We have also had great success with five LIFE projects, under which we have received EU funding for the conversion of woodlands in a similar category which are reverting to peatland over time. We are trying, within the confines of existing legislation, to be creative in how we address these matters. We would like to see a situation whereby the management prescription, what one is required to do after the area has been felled, is proportionate to the likely value of the successor crop. If one has very productive land that has grown very productive trees or is capable of growing broadleaf trees, the landowner should be obliged to restock that at the full level and maximise his or her productivity. If one has very poor areas that should never have been planted, there must be an incentive for the landowner to manage that land appropriately. Requiring the landowner to replant it uneconomically makes no sense. We see the Forestry Bill as an opportunity to introduce a more flexible regime.

Mr. Gerry Britchfield

The next question was on long-term supply contracts for biomass users.

We are in the business of providing biomass solutions to some customers. I mentioned Astellas earlier in Killorglin, to which we provide chips.

Deputy Michael McNamara

But not the raw material.

Mr. Gerry Britchfield

They are chips from pulp. We take our own pulp but provide them with that product. We want to give them the product they can use in their boiler but we start with our pulp and chip it for them. We also supply companies such as the Radisson Blu in Donegal. They are small-volume applications of a few thousands cubic metres per annum. We are happy to talk to people about bioenergy uses or any use of our fibre. Animal bedding is another area for which we supply pulp wood volume but, ultimately, it must stack up from a commercial perspective. We have panel businesses that make a good contribution and that can make a strong contribution to the State in the future. They employ large numbers of people in the south east. We also want to supply those businesses, as they have an important role to play, as well as the bioenergy sector.

The solution to this is mobilising private supply. Over the past 20 years the State has supported large-scale afforestation by farmers, and much of that land is reaching the point at which it needs to be thinned. According to the COFORD projections for timber supply into the future by the Department of Agriculture, Food and the Marine, approximately 500,000 cu. m of additional pulpwood is forecast to be available, and the key for Ireland in growing a bioenergy sector is to mobilise that private supply to make sure the wood-paying capability of the biomass sector is attractive enough to get the farmer to thin his crop, because if he does not do so now the value of the crop will fall substantially and, at clear fell, he simply will not get the value for it and the State will not get the value for the investment it has made in the context of grants and premiums.

With regard to the Bord na Móna piece, I will not comment on speculation in the Sunday newspapers. There are a relatively small number of areas of synergy between Coillte and Bord na Móna because there is not a great deal of overlap. We do not sell the same products, supply the same customers or use the same routes. We export a large proportion of what we produce, either directly or indirectly, while Bord na Móna generates most of its revenue in Ireland. However, there would be savings in overheads. That is an area in which there could be synergy benefits and we recognise that. We have identified what we believe would be the value of those benefits. We have worked closely and well with Bord na Móna. We do not agree with the company's managers on everything but, ultimately, we have put our case and analysis to NewERA and it has done likewise.

Mr. Gerry Egan

It is important to reiterate that in the past five years, with the economic difficulties and so on that we have had, we reduced our operating costs by €14 million per year and we have reduced our employee numbers by 25%. That has all been done below the radar with no industrial relations issues. It was all done with co-operation and, therefore, we have nothing to fear with regard to further overhead cost reductions and so on. An integral part of our strategy, which will create the €450 million in added value and pay a dividend of €20 million to our shareholder, requires a sustained programme of cost reduction, and we have detailed that area by area, section by section and department by department. Further cost reductions and so on hold no fears for Coillte.

Mr. Gerry Britchfield

I refer to the question on the David Gunning court case. The ex-chief executive officer of Coillte has taken court action against the company on foot of his belief that moneys are due to him under his contract of employment. I cannot comment further. Clearly, the fact that he has taken a claim means the company does not necessarily agree with him and, therefore, the courts will have to determine that issue.

With regard to the Coillte business model, we have been through five extremely difficult years. Our businesses are very much rooted in the construction sector, which has had a difficult time both in Ireland and across Europe. We have been focused over the past five years on making sure we keep the business in as good a position as we possibly can. We have not increased our borrowings significantly over that time. We have managed, as Mr. Egan said earlier, to reduce our costs significantly over that period to keep ourselves in a reasonably good position. The best comparison is operating profit for exceptional items. It was €35 million in 2012, €46 million in 2010 and €41 million in 2011, while this year it will be between €35 million and €40 million. Regarding the question of whether the business model needs an overhaul, we are focused in our new strategy on both growing the business and continuing to take costs out of it. We are not there yet and we do not claim that we are, but it is important to acknowledge that we have taken substantial action. Few, if any, semi-state companies have reduced their workforce by 25% over the past five years. I do not say that with a great deal of pride, but it is a fact. We had to do it because, ultimately, we had to reduce our costs. The model is not broken. We need to be in a position in which we can generate more cash in order that we can invest in growth and start providing the shareholder with a return on its investment.

Vice Chairman

Officials are waiting outside for the next item on the agenda. Will member keep their questions as brief and concise as possible?

Senator Pat O'Neill

I thank the officials for their presentation. The price of timber has steadily increased over the past 18 months. Are the SmartPly and Medite plants coming under pressure because Coillte, as their supplier, is finding it difficult to continue to supply them? Over the past year a decision was made not to sell Coillte, but one of the reasons for not investing in the SmartPly and Medite plants was that they could be sold. Is Coillte prepared to invest the €30 million that SmartPly is looking for to refit the plant in south Kilkenny, not Waterford? The two plants are Coillte successes.

The company hopes to achieve €450 million in added value. Much of its land is used for recreational purposes, which does not benefit the company. What is Mr. Britchfield's vision for tourism on Coillte sites over the next ten years? For example, could log cabins be built and rented for weeks, months or the summer? Is that part of the vision? If so, has the company been in contact with local authorities regarding development plans?

Deputy Richard Boyd Barrett

I thank the Coillte representatives for their contribution. I wish I had all day to ask questions because I have so many.

I am very much a supporter of forestry and I am very glad the Government was forced to reconsider its original commitment to sell Coillte. It is vital it stays in public ownership. Having said that, the witnesses are probably aware that there are very significant concerns over the operation of Coillte and its strategic direction.

We do not seem to have enough information on what is going on in Coillte. I have learned a bit today but I have many questions about many aspects of what is happening in the company. I have questions on the sale of land, which the witnesses have mentioned briefly. We have touched on the sale of land for particularly controversial developments, but we need to go into more detail. I have questions on afforestation, monoculture and the need to move to a greater level of planting of native species. I have questions on the environmental damage that may result from the over reliance on Sitka spruce. Many people suggest this will lead to damage to biodiversity, acidification of watercourses and so on. There is the question of whether we are realising the full potential of forestry for generating employment and revenue for the State.

What has become of the review of Coillte that was started in 2010? Who conducted that review? That review should inform any proper discussion on the Forestry Bill the witnesses mentioned. The group that conducted that overall review indicated it could not get access to the review of Coillte. Where is that review? Why was it suspended? Who carried it out? What is in it? Can we see it? We cannot even begin to discuss what is happening with forestry and the form of the Forestry Bill until we see what is in that.

On the issue of the sale of land, the witnesses said that in recent times since the Government decided to start its examination of whether to sell Coillte, it has not been selling big tranches of land to pension funds and so on. That is only two years. What about before that? How much land was sold to the Irish Forest Unit Trust? What is Coillte's involvement in the Irish Forest Unit Trust, which for the public's benefit includes Coillte, Bank of Ireland, Irish Life and AIB? What is Coillte's role in it? What is it for? Why would Coillte be selling land to the trust in the first place? How much land was sold to it before 2011?

On the environment, reforestation and so on, has Coillte conducted any soil or water analysis, given its obligation to protect the environment? That relates to the point about acidification, monoculture and so forth.

How much of the €400 million loan facility extended to Coillte under the Forestry (Amendment) Act 2009 has been allocated to the restoration and rehabilitation of the sites identified by Mr. Colm McCarthy as not commercially viable - I believe it was 500,000 acres - and particularly looking at the planting of native broadleaf species? How much of that money has gone to the development of wind energy? I am asking for the comparison of how much is going into afforestation with how much is going into the development of wind energy.

I accept what the witnesses have said that much of what is impacting on Coillte's strategy is the 1988 Act and the mandate it gives Coillte to return a dividend to the State, from which a number of things flow. The witnesses say that because of that commercial mandate or the requirement to return a dividend and also the fact it cannot benefit from premia for afforestation, it cannot do afforestation which should be its main task. I note this "trees are just the start of it" phrase. I would have thought that trees should be the start, middle and end of it for a semi-State company that is the biggest owner of forests in the State. On the job of meeting the 17% afforestation target, the Bacon report suggested we should be planting 15,000 ha to 20,000 ha, we are only planting 6,000 ha and the witnesses are saying Coillte cannot do it. It is a crazy and anomalous situation to have these targets while the biggest owner of forests in the State which is 100% owned by the public cannot plant these forests. That is a real problem.

If the Forestry Bill that is being discussed required Coillte to do that and gave it specific targets for afforestation as its central mandate, would that change the situation? I believe that is what should happen. Similarly, Coillte should be given targets - they should also exist more generally - dealing with climate change, the role afforestation can have in acting as a carbon sink and all those sorts of things.

On employment and the economy, a report suggests that several hundred jobs can be created for every 15,000 ha planted, yet we are not planting those forests. Would it be fair to suggest there are two approaches to forestry, one of which Coillte is following? We might it call the austerity and privatisation approach to forestry, which is to cut back on costs and not do anything that might require long-term investment. As a result, it is not able to increase the level of afforestation and is not generating a significant number of jobs. As the witnesses rightly admitted, 20% of the jobs have gone in Coillte and this is not a great model for forestry. We would be better having a model based on the requirement to grow forests. It should put more emphasis on growing native broadleaf forests and not be just about export orientation but also be about linking in with the development of the economy more widely in this country. That would require a substantial change in Coillte's mandate.

I was asked to ask Coillte a specific question. The ESB replacement pole scheme has been ongoing since 2008, requiring potentially 100,000 new poles at, I believe, around €500 per pole. If I am correct, Coillte is not involved in those replacement poles. I ask the witnesses to clarify whether Coillte is involved. I understand the poles being replaced were originally provided by Coillte but the replacement poles are being imported.

If this is the case why is it the case?

On the issue of the sales of land, Coillte stated recently it is not selling to big pension funds. I have asked about the Irish Forestry Unit Trust and I hope the witnesses will answer the question. Is there a reason Coillte could not give us, as part of its annual reporting or regular reporting to the public and to Parliament, details of all these sales, how decisions were made about selling or not and other important decisions relating to the public forest estate, its disposal and use?

With regard to the damaging impact of clear felling, Derrybrien was one of the worst environmental disasters we have ever seen and nearly led to the loss of a village. Several other similar landslides resulted from clear felling in Leitrim and Kerry. What does Coillte have to say about the damage clear felling can do given the critical role trees having in holding soil and mountains together?

Deputy Luke 'Ming' Flanagan

The notice we received for this meeting stated its purpose is to discuss the annual report but the document we have is not the annual report.

Mr. Gerry Egan

It is this document which is the annual report. It was published in July.

Deputy Luke 'Ming' Flanagan

It is lovely but it does not tell us very much. Why is there a shortfall from 3.024 million cu. m to 2.3 million cu. m? A forecast done in December 2011 for 2012 should be more correct than this. Why was the volume available to the sawmills short while the volume of pulp sales was higher than forecast? Is Coillte protecting supplies to its own board mills? Is it possible that what is known as pulp within the forestry industry can be made available at commercial rates to the sawmillers and no longer can be directed exclusively to Coillte board plants? Do the witnesses agree there would be a better return to the State if this product were transacted on an open and transparent basis whereby all processors of our forestry, including Coillte, would have to bid for it rather than the current situation whereby Coillte directs pulp to its board plants without any cost to it? Are the witnesses aware that at a recent forestry industry event held in the UK, an oriented strand board manufacturer, whose name I will not mention, asked participants to sign a petition requesting pulp from Irish forests be made available to all in the industry and not just to Coillte's boards plants? European awards were mentioned. Will witnesses assure us there is no conflict with EU competition directives with regard to Coillte having sole use of this product?

Has Coillte sold immature forests in 2012 to boost present day figures to the detriment of future returns? The chief executive review states Coillte completed a major restructuring of its forest divisions making it more responsive to its customer needs and helping it reduce costs. Will the witnesses quantify the cost reduction? Earlier the witnesses spoke about laying off staff. Coillte is an industrial organisation so why are 54% of the staff classed as non-industrial? There are 521 non-industrial staff and 431 industrial staff. Are the trees chopped down in offices?

Natural heritage and other such protected areas were mentioned. It has come to my attention that many private foresters and landowners are dealing with the situation whereby they grew forestry and find it is within a natural heritage area and they cannot do anything with it. To what extent has Coillte been affected by this? I look forward to hearing the witnesses respond.

Vice Chairman

There is a sawmill in my constituency in Carlow. The people there tell me they find it difficult to get timber and it is cheaper to import it from Scotland than to buy it locally. Is there an explanation for this?

Mr. Gerry Britchfield

Senator O'Neill asked whether we have difficulties in supplying SmartPly and Medite. We have supplied SmartPly and Medite to meet their requirements in recent years. SmartPly uses only pulpwood in its mill and Medite uses a mix of pulpwood and sawmill residues such as sawmill chips. Medite has more flexibility in terms of how it gets its raw material. SmartPly and Medite pay the market price for pulpwood in Ireland, which is significantly higher than the price their competitors pay for pulpwood in the UK market. A question was asked about whether re-investment in SmartPly is likely to go ahead. We have sought approval from the Minister to make this investment of approximately €60 million in SmartPly which will re-invigorate the mill and set it up for the future, allowing us to grow the business and protect the 150 direct jobs and the 150 indirect jobs. We are committed to it and are awaiting approval from the Minister. We understand a decision will be made shortly. We are very hopeful we will get the go-ahead to proceed with this investment.

With regard to our vision for recreation and tourism, specifically with regard to log cabins, in a broader sense we certainly see ourselves continuing to contribute to building up the tourism infrastructure in Ireland. We make a big contribution through the pieces I discussed earlier. The wilderness area in Mayo has the potential to add another string to the bow for Irish tourism and to be another attraction. We are also working with Cavan County Council on the geopark in the burren there. We are very open to working with local authorities on new and innovative projects they might have to add value to their tourism offering. Over the years we have proved we are very open to this through Lough Key, the Burren and the Ballyhoura mountain bike trails. We are open to working with local authorities.

We do not have specifics ourselves with regard to log cabins. We had a small number of log cabins in Killykeen but they did not make commercial sense. It was not a business we could make work so we no longer operate it. We are very open to talking to local authorities or other parties with innovative plans to improve tourism infrastructure.

Mr. Gerry Egan

This forum gives us the opportunity each year to speak to people. We are more than happy at any given time for any member of the committee to meet us or for us to come to this committee to discuss unanswered questions or other issues committee members have. We are conscious our time today is short.

Deputy Luke 'Ming' Flanagan

Can we record them? This is the benefit of these committee meetings. It is very important.

Mr. Gerry Egan

Recording a private conversation would be an interesting concept.

Deputy Luke 'Ming' Flanagan

It would not be private; we own it.

Mr. Gerry Egan

Okay. On the strategic direction of Coillte and so on, I will comment first on the review of Coillte. As stated by Deputy Boyd Barrett, the previous Government announced a three part review of forestry policy. This included a review of national forest policy, on which a public consultation process is under way, a review of Coillte and a review of the financial incentives for forestry. In regard to the review of Coillte, while Coillte was the subject of the review, it was not conducted by the company. The committee would need to speak to the Minister for Agriculture, Food and the Marine about that. It is not open to us to comment on that one way or the other because, as I said, Coillte was the subject rather than the conductor of that review.

Deputy Richard Boyd Barrett

Coillte has not seen and is not aware of the contents of that review?

Mr. Gerry Egan

No. A review process was initiated. A number of things happened in the meantime. For example, the Government decided to undertake a review of State assets and liabilities, which work was undertaken by Mr. Colm McCarthy. The Government subsequently decided to sell the harvesting rights of Coillte, which decision has since been reversed. The most significant thing that happened was the change of Government in the meantime. As things stand, to my knowledge, the review of Coillte initiated in 2010 has not been officially concluded.

On the sale of land and so on, Coillte forests are certified by the Forest Stewardship Council, FSC, as being managed responsibly in accordance with the international principles and criteria operated by it. One of the requirements on Coillte is that if it sells a piece of land, it must ensure it is "excised from the State". In other words, it must be identified as no longer belonging to Coillte. Our website includes a full list of properties and so on excised on a calendar year basis. The information in relation to such properties and so on is in the public domain.

In regard to transactions with a third party, members will appreciate that Coillte does not disclose the details of these transactions. The reason we do not publish the details of the price achieved for particular pieces of property when sold is because the other party has the right to have his or her privacy respected. On the wider environmental issues-----

Deputy Richard Boyd Barrett

Perhaps Mr. Egan would respond to my question regarding the Irish Forestry Unit Trust.

Mr. Gerry Egan

I was trying to group the questions logically. The Irish Forestry Unit Trust is a vehicle that enables pension funds to invest in forestry in Ireland. It allows pension funds such as the ESB, An Post and Canadian Teachers' pensions funds, an opportunity to invest in productive assets in Ireland. It was established in 1993 and involved the coming together of two existing forestry investment funds owned by Irish Life and AIB Investment Managers and Coillte. Coillte got involved because there was a need for immature forests as part of the fund in order that investors could liquidate their investments from time to time, as in the case of any pension fund. People retire and need to be able to take their money out. In terms of forests given over by Coillte to the fund, the forest has been sold but the land has been retained. Even where the harvesting rights of these forests have been sold to the Irish Forestry Unit Trust, the land is retained in the ownership of Coillte.

There is also a second fund, entitled the prescient Irish Forestry Unit Trust. Any of the forests sold by Coillte into these funds have been sold for one rotation and the land has been retained by Coillte on behalf of the State. Both of these funds publish their accounts and are available in the public domain. Full details of the holders of the units is a matter of public record. The only reason I hold back on saying what area of forestry is sold is that I do not want to give the Deputy the wrong information. Some of the sales date back over ten years. I will follow up on the matter and communicate tomorrow or the day after with the information in relation to the area of forest that has been given over to these funds.

Deputy Michael McNamara

Can I get a copy of that information?

Mr. Gerry Egan

I will make the information available to the clerk for distribution to committee members. In relation to environmental issues generally, including soil and water analysis, clear felling and so on, I would-----

Deputy Richard Boyd Barrett

For clarity, am I correct that up until two years ago, Coillte sold the harvesting rights of quantities of public land to a bank and an insurance company in order that they could generate dividends for their pension funds?

Mr. Gerry Egan

No. These funds were established to allow other people to invest, in the same way that a teachers' or mine workers' pension fund will invest in equities, commercial property or other classes of assets. Pension funds like to have a certain proportion of their assets in assets like forestry because they provide a steady although unspectacular return.

Deputy Richard Boyd Barrett

I get the value for them. I am wondering about the value for the taxpayer, as the public owner of the forests and harvesting rights.

Mr. Gerry Egan

What one is doing in effect is collecting cash today for timber that would ordinarily be harvested 25 or 30 years in the future. This generates cash which one is in a position to invest today. At the time when the funds commenced, that money would have been used by Coillte to buy the 64,000 hectares of land it purchased for afforestation purposes. There is no mystery. What Coillte was doing was trying to facilitate investment in Ireland by people who were interested in investing in forest assets. To do this, it was necessary to introduce some type of mature forests into these funds. The other fund I mentioned has been largely invested in by the National Pensions Reserve Fund. These issues are all a matter of public record. There is nothing underhand in any respect about them.

On the environmental issues, I will, if I may, give an umbrella response. Since 2001, Coillte has been certified by the Forest Stewardship Council as managing our forests responsibly. Every year a team of auditors from the Soil Association in the UK, which is one of the large certifiers of organic farming and so on, comes to Ireland and puts Coillte through a rigorous process of assessment in terms of forest management practices based on 85 different environmental, social and economic criteria, including the harvesting systems we use, safety practices, inventory processes, species planted, clear felling activities and so on.

We are in a position where our forest management practices have been certified for 12 years and are put through the ringer annually to ensure we continue to hold on to it. We have that kind of external validation, with in the region of 350,000 ha of forest internationally certified to the same standard. That is as much as I can offer in reply to that. Mr. Britchfield will speak to Coillte's commercial mandate.

Deputy Michael McNamara

I have a supplementary question. The harvesting rights were sold to pension funds but how was the value determined? Was it based on international indices or comparisons?

Mr. Gerry Britchfield

We valued the forests on the basis of internationally accepted principles, with terms expected from forestry assets.

Deputy Michael McNamara

International returns.

Mr. Gerry Britchfield

Yes. We are reflecting the returns that could be got in Ireland in terms of growth rates and quality of the product being brought to market, etc. Ultimately, the National Pensions Reserve Fund would have invested in the preceding vehicle and it would have had a view on the return. We have a view on the return we want from the asset, and there is obviously a negotiation between two parties. Ultimately, in that case the National Pensions Reserve Fund was happy with the return it got, which was benchmarked against the sort of returns one could expect from forestry assets on an international basis.

Deputy Boyd Barrett made points that are ultimately around what is our mandate. We are owned by the shareholder - the State - and the Minister determines the mandate for us. It is set in the Forestry Act 1988 and the policy directions given by the Minister. As recently as when the decision not to proceed with the harvesting rights sale was made earlier this year, the Government and the Minister made it absolutely clear that the priority for Coillte is to put it in a position to pay a financial dividend on the asset it owns. That is the mandate we have been given, although if we are given a different mandate, we will follow that too. We are owned by the State and the Government and we will do what we are mandated to by the Government, the shareholder.

Deputy Richard Boyd Barrett

There are obvious limits to what the witnesses can say. They seem to be indicating that the current mandate that Coillte has as the biggest publicly owned forest estate manager in the country means it cannot afforest, although it is a stated national objective to reach a 17% target.

Mr. Gerry Britchfield

As I stated earlier, we would love to be involved in afforestation as we are foresters. Ultimately, we cannot afford to buy land on the open market, which is where we must buy it, in competition with others who wish to buy the land when we do not qualify for the premia that, for example, a farmer would have. If we are up against somebody qualifying for a premium in competing for that land, we cannot pay the market price and make a commercial prospect out of planting it. That does not stack up. We are not in the afforestation market, although we have tried other ways of trying to ensure we are involved in new planting, and, for example, we have been involved in the farm partnership process over the last decade, with approximately 10,000 ha having been planted by farmers in partnership with us. Ultimately, without forestry premia, it is very difficult for us to compete in the open market for land.

Deputy Richard Boyd Barrett

It is an anomalous position.

Mr. Gerry Britchfield

We would love to be involved in afforestation if we could afford it but we cannot, so we have been focussing on reforestation. With regard to job creation, members have indicated that trees are just the start. We have been entrusted with the stewardship of two valuable assets; one is the fibre, or the forest, and the other is the land. We see it as our responsibility to the shareholder - the State - to ensure we get a return on both of those. We do not apologise for trying to get value for the State from elements like wind farm development, as that is playing straight to Government policy. That indicates that 40% of electricity generation in Ireland by 2020 should come from renewables, and primarily wind. We are trying to play our part in delivering that Government objective by using the land we have been entrusted with. Through those vehicles we are creating jobs, and we are also doing so in our panels business. We have had to reduce our workforce during the downturn, which is not unusual in the context of other businesses that have faced extremely difficult market environments. Our businesses are totally exposed to the construction sector and we have had to face that reality by reducing costs.

We were asked a question about poles. I cannot claim to have total knowledge of the matter but in the past the ESB sought Douglas fir poles and we do not availability of Douglas fir poles today. We had provided poles to the ESB and the telecoms company in the 1990s as a key supplier but we do not now have what they are looking for. I admit I am slightly shaky ground as I do not know enough about the subject. I think the issue is down to the species, and the company is seeking Douglas fir.

Deputy Richard Boyd Barrett

Is there a reason they cannot be grown?

Mr. Gerry Britchfield

We can grow them but the cycle is 40 to 50 years in order to get them to maturity. They want mature crops and we do not have them today.

Deputy Richard Boyd Barrett

So we did not plan or manage for something that was likely.

Mr. Gerry Britchfield

We certainly do not have the poles the company requires today in the quantity it needs. It may be bad planning and perhaps 40 years ago we should have foreseen the issue. We did not.

With regard to clear felling and its impact, cases like the landslide in Derrybrien should not happen. That was down to the nature and perhaps the practices of the site. We were not involved in that, although we owned the land. We were not involved in building the wind farm and the land was owned by another private company at the time.

Deputy Richard Boyd Barrett

Does the witness not see, to put it mildly, what can be perceived as a tension and sometimes a direct contradiction between Coillte's mandate as the stewards of the public forest estate, with all it entails, and the commercial imperative that is pushing the company towards wind farming and so on? In some cases there are quite damaging consequences for the environment. I have not even mentioned issues such as the sale of forest land at Bellinaboy to facilitate Shell and all that it entails. Is there not quite a stark contradiction?

Mr. Gerry Britchfield

Ultimately, with the assets we have we are trying to fulfil Government objectives. The Government has the objective of generating 40% of electricity in Ireland by 2020 from renewable sources, and primarily wind. We are trying to use our land to fulfil that Government objective. That is what we are about, and we are mandated by the shareholder - the Government - to do what we can to deliver on its policy objectives. That is what we are doing.

Deputy Richard Boyd Barrett

The company could grow more forestry to the same end.

Mr. Gerry Britchfield

To reply to Deputy Luke 'Ming' Flanagan, we debate forecast differentials on a regular basis with sawmill customers. We must ensure to compare apples with apples and ultimately gross volumes do not include elements like harvesting losses or inaccessible areas. We debate forecasts with customers on a regular basis and we have clearly explained issues they have raised with regard to gross volume versus net volume coming to the market.

Deputy Luke 'Ming' Flanagan

Can Mr. Britchfield explain it to me? I did not ask him to explain it to somebody else, with respect.

Mr. Gerry Britchfield

Okay. If one has a tree standing in a forest, one has gross volume. One has a theoretical volume on the stump in the forest. When one harvests that tree, one will lose part of that crop because one must leave a certain height for the stump and one is removing the brash, so one leaves some of that behind. Ultimately, one will not get and deliver to the sawmill, in net terms, the same as what is standing in the stump. Also, there are areas in our forest estate that we say are available but some of them might not be immediately accessible. There might be road or access issues.

Deputy Luke 'Ming' Flanagan

Did the witness not know this in advance of making the prediction? He knows all these variables exist. How can he be so far out?

Mr. Gerry Britchfield

We do. Ultimately what we are doing is forecasting gross volumes, but we are not saying we will bring all of that to the market next year.

Mr. Gerry Egan

We provide the information. It is in accordance with international conventions. This is the way it is done internationally. Second, our system of selling timber goes back to an agreement we made with the Irish Timber Council, which represents the sawmillers, in 1996. Everything we do in terms of how we sell our timber, how it is put up for auction and how the reserve price is calculated all flow back to the agreement made then with the sawmill sector.

Deputy Luke 'Ming' Flanagan

I am sorry-----

Vice Chairman

We will wait until all the questions are answered and there will be a brief supplementary question afterwards.

Deputy Luke 'Ming' Flanagan

That question has not been answered. What is the point in continuing to not answer further questions? How can Coillte be so far out in its forecasts?

Mr. Gerry Britchfield

I am saying we are not.

Deputy Luke 'Ming' Flanagan

It is 3.024 million down to 2.3 million.

Mr. Gerry Britchfield

Ultimately, we are comparing gross volumes with net volumes.

Deputy Luke 'Ming' Flanagan

Will the witness be doing that next year in the forecasts?

Vice Chairman

Let the witnesses complete the answers first.

Deputy Luke 'Ming' Flanagan

Chairman, if they do not answer a question, do I have to put up with it?

Vice Chairman

You can ask a supplementary question at the end if you are not happy.

Deputy Luke 'Ming' Flanagan

Everybody else had a supplementary question as they went along. I intervened in the same way.

Vice Chairman

Carry on, gentlemen.

Mr. Gerry Britchfield

We sell pulp wood on the open market. We have other customers for pulp besides the boardmills but we make no apology for supplying our boardmills with pulp wood. They support 300 jobs in the south east directly and 300 or 400 indirectly. They are extremely good and vibrant businesses and are very innovative. We believe they have a great future. We are quite proud of them. As to whether it conflicts with competition law, we do not believe it does. There is no conflict in terms of competition law with supplying mills one owns with pulp wood one owns. There is no conflict there.

With regard to the Coillte forest restructuring, the purpose of the Coillte-----

Deputy Luke 'Ming' Flanagan

The witness is jumping past questions. What about the petition? Has the witness dealt with that question?

Mr. Gerry Britchfield

I have no knowledge of this petition, so I cannot comment on it.

Deputy Luke 'Ming' Flanagan

The witness knows now. What does he think of it?

Mr. Gerry Britchfield

I do not understand it, to be frank.

Mr. Gerry Egan

As I understood the Deputy's question-----

Deputy Luke 'Ming' Flanagan

I have now modified it. Will the witness answer it?

Mr. Gerry Egan

As I understand the issue, some unnamed OSB manufacturer, who may or may not be Irish, at an event in the UK had a petition to try to source pulp wood. Am I in the right ball park?

Deputy Luke 'Ming' Flanagan

I asked the witnesses if they were aware that at a recent forestry industry event held in the UK, an oriented strand board manufacturer was asking participants to sign a petition requesting that pulp from Irish forests be made available to all the industry, not just Coillte board plants. The witness is obviously not aware of it. Now that he is, what does he think of it?

Mr. Gerry Egan

Coillte, through its subsidiary company SmartPly, is the only Irish manufacturer of OSB. I do not understand how we would have a petition to get it to supply our own mills when we are doing that already, which is what we are being accused of doing anti-competitively. I am struggling to understand the issue, in fairness.

Mr. Gerry Britchfield

Is it a competitor of ours who was saying they want-----

Deputy Luke 'Ming' Flanagan

That is my understanding of it, but the witnesses are not aware of it.

Mr. Gerry Britchfield

I have not seen any petition from anybody regarding whether we should or should not supply pulp wood to our own mills. Whether it is from an OSB manufacturer or otherwise, I have not seen any petition in that context.

Deputy Luke 'Ming' Flanagan

I will get the witnesses more information on it. It is something they should know.

Mr. Gerry Britchfield

Our competitors might say many things about us that we do not necessarily always agree with either, but-----

Deputy Luke 'Ming' Flanagan

I do not own Coillte's competitors, but I do own part of Coillte. It is my concern.

Mr. Gerry Britchfield

Okay. With regard to the Coillte restructuring, the focus of that is to make us more competitive and to ensure that we can supply our customers more effectively and efficiently. The restructuring was about ensuring we restructure the business to focus better on what we thought were our customers' needs. We work very closely with them daily, supplying them with 1.5 million cubic metres of sawlog. We have our disagreements but, by and large, we deliver to them what they require, when they require it.

Mr. Gerry Egan

Deputy Flanagan also had a question about the fact that 54% of the people in our staff breakdown are described as non-industrial staff. That refers to our direct employees, but we also employ approximately 1,400 contractors indirectly. The administrative, technical and supervisory people are included in that 54%. A large part of the managing they do is managing people who are not directly employed by the company but who provide all our planting, harvesting and haulage services, all of which are outsourced to third party contractors. We are very much an industrial business but the nature of the workforce is that all of the people involved are not necessarily direct employees.

He also had a question about the sale of immature forests in 2013.

Deputy Luke 'Ming' Flanagan

It was 2012.

Mr. Gerry Egan

There were no sales of immature forests in 2012. The last sale of immature forest by Coillte was in 2009.

Mr. Gerry Britchfield

There was a question about NHAs. Many of our lands would be classified as NHAs and have other environmental designations. We must manage them in that context, like anybody else must. We are subject to the normal requirements under law when one is operating in a NHA.

Turning to the question from the Vice Chairman about the difficulty getting timber and the price of Irish timber vis-à-vis imports, we offer all the available volume we have in any year on the market. In fact, in the current year we are selling more than 98% of what we offer. Basically, we offer all we have and our sawmill customers are acquiring that volume through an auction process which we have agreed with them. It is the way we have mutually agreed we will offer our timber to the market. Prices in Ireland for logs are high compared to the prices in the UK. There are two issues involved. The prices in the UK are relatively low compared to European prices, but I also acknowledge the prices for sawlog in Ireland are relatively high. Ultimately, we are offering the volume on the market to our sawmill customers in the way we have agreed with them and they are acquiring that volume on the basis of bidding for it on the system.

Vice Chairman

You made the point that there is more timber available now than there was in 2006. In 2006, obviously, there would have been a greater need for it with the building industry coming to a peak at the time. If there is more now than in 2006, how is it at the current price, given that there is not as much demand for it?

Mr. Gerry Britchfield

With regard to the volumes we sold in 2006 versus the volumes we are selling now, last year we sold 2.3 million cubic metres. I honestly do not know what we sold in 2006, but I would say it was similar. I would not say it was radically different from that. The volumes we have been offering in the market would be quite similar over the last number of years. The price of sawlog is set by the market. We offer everything we have. We do not hold anything back. It all goes on the system and 98% or more is sold. It is sold on the basis of people bidding the prices they believe they can afford to pay in order to move that volume into the UK market and elsewhere. I acknowledge that prices are quite high at present.

Mr. Gerry Egan

Prices are quite high and all of the sawmills are investing in modernising their plant. Clearly, from a market point of view, there is a demand and margin to be made. The big success has been that the sawmills have moved, following the collapse in the construction industry here, to a thriving export industry. One thing about a recession is that it causes people to be innovative and reach out to new markets.

Vice Chairman

It seems strange that one can import the material at a cheaper cost than it is available here.

Mr. Gerry Britchfield

The total volume of imports into Ireland last year was somewhere around 100,000 cu. m. Therefore, 100,000 cu. m of volume was imported into the country and we supplied 2.3 million cu. m in total with 1.4 million cu. m. or 1.5 million cu. m in saw log. The import piece is very small compared with the amount that we supply to the market.

With regard to where volume can come from, due to phyto-sanitary reasons there is only a small part of western Scotland where logs can be imported into Ireland without being debarked, which is extremely expensive. On the one hand, every two weeks we put volume on the market. There may be occasions when a sawmill can go to Scotland and acquire volume, an on-the-spot market, and at a price that is comparable with what they are paying for our logs. I do not know what they pay for imports. I hazard a guess that it is reasonably comparable to what they pay us but not by the time they get it to their mill gate.

Vice Chairman

It must be a big cost to bring logs from Scotland to a mill.

Mr. Gerry Britchfield

With regard to the delivered price of that log to the sawmill's gate, or the import versus the log that they acquire from Coillte, I do not know how much they pay for imports. I would be surprised if there was a large difference between the two numbers.

Vice Chairman

I shall allow Deputy Luke 'Ming' Flanagan a brief supplementary question.

Deputy Luke 'Ming' Flanagan

Is Coillte aware of an investigation by the Department of Agriculture, Food and the Marine into an allegation of fraud in Coillte?

Vice Chairman

With the greatest respect, we are discussing 2011 report.

Deputy Luke 'Ming' Flanagan

It is 2012.

Vice Chairman

What has the Deputy's question got to do with the report?

Deputy Luke 'Ming' Flanagan

Perhaps we can establish that now and that is why I asked my question.

Mr. Gerry Britchfield

The answer to the question is "Yes." We are aware of and are co-operating with an investigation being carried out by the Department. The part that I would dispute is that the investigation is into an allegation of fraud. There is an investigation going on about certain allegations on the way timber has been measured. We are co-operating fully and all of the necessary information sought by the Department has been provided, and not for the first time, as part of the investigation. Therefore, it is the gift of the Department to conclude its investigation.

Deputy Luke 'Ming' Flanagan

Is Coillte delighted about that? Providing information is something that Coillte should do. Why is it relevant to state that Coillte provided the information before? Coillte should provide information as often as is needed.

Mr. Gerry Britchfield

I am saying that the issues have been raised and investigated in the past and we have co-operated with those investigations in the past.

Deputy Luke 'Ming' Flanagan

Was it investigated in the past?

Mr. Gerry Britchfield

It has been reviewed and questioned in the past.

Deputy Luke 'Ming' Flanagan

Let me clarify. Has it been investigated in the past or reviewed?

Mr. Gerry Britchfield

I am not quite sure how the Deputy defines "investigation".

Deputy Luke 'Ming' Flanagan

We need for you to establish that. Has it been investigated in the past or not?

Mr. Gerry Britchfield

The question has been raised in the past.

Deputy Luke 'Ming' Flanagan

So it has not been investigated.

Mr. Gerry Britchfield

I do not know whether it was investigated.

Deputy Luke 'Ming' Flanagan

I thank Mr. Britchfield for clarifying the matter.

Mr. Gerry Britchfield

I do not know whether it was investigated.

Vice Chairman

I shall allow Deputy Boyd Barrett to ask a brief and final supplementary question.

Deputy Richard Boyd Barrett

I have gelled around some of the things the delegation has said. Ireland aims to reach a target of 17% forestation which is pretty modest given the fact that we have a capacity to grow trees pretty fast but a desperately low level of forest cover. Given what the delegation has said to us, is there any chance that Ireland will ever reach its target? Coillte seems to be saying that it cannot contribute in any substantial way to reaching that target and, presumably, nobody else can. Is the target a complete fantasy and one that we will never reach?

Mr. Gerry Britchfield

Farmers will have to decide whether they want to plant land in order to reach the target.

Deputy Richard Boyd Barrett

Is there a realistic possibility that will happen anytime soon?

Mr. Gerry Britchfield

I do not know. We plant about 7,000 ha per annum.

Deputy Richard Boyd Barrett

We need to plant between 15,000 to 20,000 ha. My following comment is not directed particularly at Coillte.

Mr. Gerry Britchfield

Sure.

Deputy Richard Boyd Barrett

I am talking about a national policy issue. In Mr. Britchfield's opinion, is there any chance that Ireland will reach the target in the foreseeable future and if things continue as they are?

Mr. Gerry Britchfield

We have planted 7,000 ha in the past and we can meet the target if incentives for farmers are improved. The comparison is simple for a farmer. He will examine the range of options for his hectare of land be it planting, cattle, sheep or whatever. He will compare the returns he believes that he can get from that land under the different options and incentives that are offered under the CAP programme.

Deputy Richard Boyd Barrett

In a nice way Mr. Britchfield has said "No". Perhaps he feels constrained due to his position.

Mr. Gerry Britchfield

I am not saying that it cannot be achieved. I am saying that it is an ambitious target and in order to deliver 17%, the incentive to plant must be made attractive to the farmer.

Deputy Richard Boyd Barrett

Could Coillte achieve it if it were given the mandate to do so?

Mr. Gerry Egan

It comes down to money.

(Interruptions).

Deputy Éamon Ó Cuív

I wish to ask a relevant question. This is an extraordinary situation because the shareholder is either the Minister for Agriculture, Food and the Marine or the Minister for Finance.

Mr. Gerry Britchfield

It is the Minister for Agriculture, Food and the Marine and the Minister for Public Expenditure and Reform.

Deputy Éamon Ó Cuív

They are the same people who give the competitors, namely, the private farmers, capital grants and forest premium to plant land. The shareholder owns Coillte but gives somebody else all of our money to plant land. Coillte has told us that this means that it is not viable for it to compete and plant land. It is the one organisation that is owned by the same people who give grants to the other guys.

Mr. Gerry Britchfield

Yes.

Deputy Éamon Ó Cuív

That is a big policy issue for Government and is not an issue for Coillte Teoranta. It is an issue for the committee to examine on another day. What will happen if a higher percentage of the mature forest is owned by individual farmers? Up to now we have been able to provide an adequate amount of timber to the mills to keep them viable and prevent collapse. Will they be put in jeopardy now?

One of the ironies is that 100% privatisation of all planting could lead to significant damage being done to the private timber milling sector which is so important. There is no point in growing the trees if one does not process them. My understanding of the big mills is that they depend on Coillte to bring to market, particularly in times of scarcity, enough timber to ensure their operations continue at capacity level. If, over time, more supply comes from the private sector then in times of short supply timber will be pulled off the market and prices will go through the ceiling in order to push the guys out of the market and collapse the mills. Is that a possible scenario with the present policy?

Mr. Gerry Britchfield

Most of the saw log supply that will come on stream over the next five to ten years will still come from Coillte.

Deputy Éamon Ó Cuív

What about ten to 20 years?

Mr. Gerry Britchfield

If it is 20 years then one would get to a stage where farmers would be clear felling and thus supplying significant amounts of saw log to the market. There are questions that the industry must grapple with. How do we mobilise the supply that farmers have planted? How do we make sure that the farmer thins the crop the he planted 20 years ago? If he does not do that then it will have an impact on the amount of saw log that he will produce in 20 years' time. That is a challenge for the industry. Coillte is willing to play its part in mobilising private supply. We need to do that first and foremost. The immediate challenge is to make sure that the farmer has the incentive to thin his crop so that the pulp would not come to market and that the crop can then grow on.

Deputy Éamon Ó Cuív

We must pay more money and keep the product that we own, as a people, out of the market of planting.

I suggest we cannot really go further because it is a major policy issue. We might get the Minister before the committee in the near future to tease it out with him, because it is a fundamental policy issue.

Vice Chairman

It is a debate on its own.

Deputy Éamon Ó Cuív

It is a big debate.

Vice Chairman

I gather it is on our work programme. The Minister will be in to debate the matter at a later stage.

Deputy Richard Boyd Barrett

I hope that will happen before the Forestry Bill is completed.

Deputy Éamon Ó Cuív

A good idea.

Vice Chairman

I am sorry, Deputy. I did not hear.

Deputy Richard Boyd Barrett

Can we request that it happens before the Forestry Bill is completed?

Deputy Éamon Ó Cuív

Could we discuss that at our private meeting?

Vice Chairman

We can.

Deputy Éamon Ó Cuív

I agree with that. It is a sensible suggestion.

Vice Chairman

It is on the work programme. That is all the questions. I thank the members for their questions and Mr. Gerry Egan and Mr. Gerry Britchfield for a worthwhile debate. Thank you for attending the committee.

The joint committee adjourned at 5.40 p.m. until 2 p.m. on Tuesday, 26 November 2013.