Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Apologies have been received from Deputies Éamon Ó Cuív, Martin Heydon and Pat Deering. I remind members and witnesses to turn off their mobile phones. I welcome Mr. John Moloney, chairman designate of Coillte Teoranta, and thank him for taking time to come to the meeting of the joint committee.

I wish to draw to attention the fact that witnesses are protected by absolute privilege in respect of their evidence to the committee. If witnesses are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or 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 House or an official by name or in such a way as to make him or her identifiable.

Members will be aware of the new arrangement that a chairman designate come before the relevant committee before he or she becomes chairman. The members are interested in hearing from Mr. Moloney on his approach to his role as chairman, his vision and priorities and his views on the challenges that face the company. I invite Mr. Moloney to make his opening statement.

Mr. John Moloney:

I am pleased to outline my initial views on Coillte Teoranta and how I believe I can help with the continued development of the organisation.

When I was asked by the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, to consider the role of chairman, I was pleased to do so, and I joined the board of Coillte Teoranta in 2013. My career of more than 30 years has been spent in the agriculture and food sector in Ireland, in both the public and private sector. In many ways it has not been too far from the natural resource base on which the Coillte Teoranta business is based.

My background will give members a sense of the experience I can bring to Coillte Teoranta. The core of my career was spent in the Irish dairy industry. I joined Waterford Co-op, as it was then known in 1987, having spent the six years prior to that with the then Department of Agriculture and Food. I held a number of senior positions in the co-op, which merged to form the Avonmore Waterford Group in 1997, and I joined the board of that entity in 1998. In 2001, I became managing director of Glanbia plc. I stepped down from that position in November 2013.

I have spent a considerable amount of time in the dairy and food sector based in Ireland. As members know, 80% of dairy output is exported, so it is a significantly outward-looking industry and business. In my time in the dairy sector we have been through significant change and reorganisation, which was focused on improving the competitive position of the business and enabling it to compete in international markets and to expand internationally. Today, more than 70% of Glanbia's earnings come from international operations, and in 2012, in advance of the removal of milk quotas in Europe on 1 April 2015, we restructured the Irish milk processing operation, setting up a new entity, Glanbia Ingredients Ireland, which has now undertaken the largest investment in the history of the Irish dairy industry at Belview in south Kilkenny. It is almost across the road from the SmartPly plant owned by Coillte Teoranta.

I am a non-executive director of Glanbia Ingredients Ireland as well as DCC plc, Greencore plc and the Smurfit Kappa Group. When the Minister asked me if I would take on the role of chairman of Coillte, I saw an organisation that was consistent with my activities during my career - in other words, seeking to create added value from an Irish natural resource base that is sustainable over the longer term.

Coillte was established 25 years ago as a commercial State company and has been on a journey of change and transition from being a division of a Department and the core Civil Service to a profitable, innovative and customer-focused State company. At the core of the business is custody of 7% of the land area of Ireland, or approximately 450,000 hectares, close to 1 million acres. From this stems the core activity of commercial forestry operations, with related activities, based on the location of the land, around wind energy and telecommunications. The business has revenue of €270 million and directly employs 900 people across the country. There are approximately 600 in the forest and forestry-related businesses and about 320 in the processing businesses and the panels business, with plants at Clonmel and Belview, south Kilkenny. There is also significant indirect employment - for example, in timber haulage and harvesting services. We estimate that the indirect employment amounts to another 1,300 people.

The business sits at the upper end of the supply chain of timber to the saw-milling sector in Ireland, and much of that output is destined for export markets. The timber produced in Ireland, having gone through a processing supply chain, goes to markets across Europe. The business is also integrated, as members may know, with its own manufacturing and operations producing panel board - medium-density fibreboard at the plant in Clonmel and oriented strand board at the plant in Belview in south Kilkenny. It is important to recognise that these board mills provide an important market outlet for the first thinnings from Irish forests - that is, the first crop that is harvested in a succession of harvesting operations before the clear fell stage. More than 90% of the output of those plants is exported to over 30 countries, with Coillte panel products having sales and marketing operations in the United Kingdom and the Netherlands. These markets for pulp wood are becoming more important because there will be an increased supply of that raw material coming onto the market as the private forestry plantations that have been developed in the main by farmers in the past 20 years start to come to the first thinning stage. The wood panels are subject to an ongoing market-focused innovation programme, which has impressed me, having had an initial look at it in Coillte, as to how the panels can be adapted and the manufacturing process developed to produce solutions for low-carbon, energy-efficient buildings. The raw materials from the board mills and the logs from Coillte forests are generated from responsibly managed forests under the sustainability chain certification of the Forest Stewardship Council, FSC, an independent NGO with headquarters in Germany. This certification is recognised worldwide. In a world that is correctly focusing on energy and environmental sustainability, Coillte products and practices have never been more relevant. I know some of the executive team will follow me to discuss the impact of this in terms of land use and so on.

Apart from the commercial forestry operations and related activities, the Coillte forest estate plays a key role in enabling and supporting other activities across the economy. These include outdoor recreation, tourism, water protection, community development projects and nature and cultural heritage preservation. These impacts have been valued at close to €600 million per annum. They enable a considerable amount of rural development through tourism - for example, the mountain bike trail provided in the Ballyhoura mountains has enabled spin-off rural development initiatives around tourism. It is important to note that in recent years, visitor numbers to Coillte forests have approached 118 million per annum.

Building on the history and experience the organisation has accumulated in the 25 years since it was taken from the Department and set up as a commercial State body, the business has now set out a strategy for the next five years of sustainable value from sustainable living.

At the core of that is maximising the potential of the forest estate and transforming it into products that fit with a low carbon agenda for the future, both in structural terms and in terms of a wide range of applications across the construction and related markets. It is a question of maximising the effectiveness and efficiency of the key resources of the business, which are forests and land. In light of the long-term global trends around the environment and energy sustainability, it is clear that the markets for Coillte products, while still focusing on maximising commercial value, can deliver a rise in the enterprise value of the business to the benefit of the State as a shareholder, as well as paying dividends over the next five years.

It is right that the State expects a business performance from Coillte that is on a par with the best in the private sector and that it expects the State assets vested with us - the net asset value of Coillte's balance sheet is approximately €1.3 billion, broadly speaking - to deliver sustainable returns over time. In light of my own experience of reasonably large organisations, I hope to be able to make a contribution in supporting and challenging the management to drive the business forward. I think we can maximise the commercial performance without compromising the environmental and social dividend that Coillte delivers to society at large in Ireland.

In summary, the core demand for what we produce - high-quality wood fibre from sustainably managed forests, low carbon building products and renewable energy from wind and biomass - will grow over time. The very committed team I have met in Coillte can help the company to avail of these opportunities and take the business on over the next stage of its life. I refer particularly to the next five years, on which the next iteration of the strategic plan is focused. That concludes my statement. I thank the committee.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Moloney.

Paschal Mooney (Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I welcome Mr. Moloney to this meeting of the joint committee and wish him every success with the important position he is assuming. I look forward to our future exchanges with him in his area of responsibility.

Mr. Moloney mentioned that approximately 7% of the land mass is covered by forestry. He will agree that this is considerably lower than the European average, despite Coillte's best efforts since its inception 25 years ago. I have always been fascinated by the reasons for our low afforestation rate. Does Mr. Moloney believe it can be attributed to historical factors? Would the position be different if a body like Coillte had been in existence from an earlier stage? What plans, if any, does Mr. Moloney have to try to increase the percentage of forestry in Ireland? The points he made in his presentation were well made. He spoke about the need to reduce our carbon footprint, for example. We all know about the benefits of increased afforestation. It seems to me that many parts of the country are still available for these purposes. I wonder whether Coillte has taken its eye off the ball in this regard by focusing on other areas, such as its existing assets. How does that work? How can Coillte expand? It appears that the percentage figure has remained stubbornly at the level I have mentioned for some time.

Mr. Moloney quite rightly drew attention to the enormous contribution that Coillte forests make to the tourism economy of this country. I have often wondered why Coillte appears to hide its light under a bushel. Perhaps this is purely a perception on my part. While it is impressive that 18 million visits are made to our forests each year, it seems to me that this is an area of potential growth. I am aware that Coillte links with tourism interests here. Can it find a way of marketing this asset towards particular markets, just as it markets its other assets nationally and internationally?

There has been a regular stream of complaints over the years about people dumping waste in Coillte forests. It might seem like micro-management to bring this up, but it is not helping the tourism industry. When people walk along some of these wonderful forest trails, they sometimes discover bags dumped all over the place, perhaps after being opened by wild animals. Is this a serious issue for Coillte to manage?

I reiterate that I applaud Mr. Moloney's enlightened appointment. It is obvious that he is a man of great vision and tremendous capacity. I look forward to his achievement of the objectives he sets himself over the coming years in his capacity as chairman of Coillte.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

If the Senator does not mind me saying so, his final question might be more pertinently addressed to the acting chief executive of Coillte, or some other management executive within the company.

Paschal Mooney (Fianna Fail)
Link to this: Individually | In context | Oireachtas source

That is fair enough.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The role of the chairman designate will be to develop and nurture Coillte.

Paschal Mooney (Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I was only asking.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Moloney for his presentation and wish him well in efforts to develop Coillte further for the benefit of the Irish people. I understand that Coillte has annual revenue of €270 million and directly employs 900 people. What is Mr. Moloney's vision? What are his targets for the future? Does he expect the figure of €270 million to grow? Are the 900 jobs secure? If this sector continues to grow, will Coillte employ more people directly? Mr. Moloney suggested that Coillte is responsible for 1,300 jobs in indirect employment. Will that figure increase if this sector grows? Has Coillte surveyed the minerals underneath its lands? If so, can that survey be published or can we access it? What type of relationship does Coillte have with ordinary private farmers and their work? Is a joined-up approach being pursued to increase output and jobs? Such a strategy is necessary to bring more money back into the most depressed areas of rural Ireland and the most marginal land. I wish Mr. Moloney well. I would appreciate it if he could reply to my questions.

Thomas Pringle (Donegal South West, Independent)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Moloney for his presentation. I join other speakers in wishing him well in his tenure as chairperson of Coillte.

It seems to me that Coillte, as the largest producer of biomass in the country - it is way ahead of every other producer - has been very slow to develop this sector. A project that is ongoing in England involves the conversion of the largest coal-fired power station in Europe so that it will run solely on biomass. Apparently, the potential could exist to do the same thing here in the case of Moneypoint. It seems to me that Coillte is well placed to be the lead agency in looking at how that can be developed for the future. I read somewhere in recent years that enough offcuts are available from the felling of trees - forestry waste material - to heat every house in the country regardless of the availability of more valuable products. What does Mr. Moloney intend that Coillte will do over the next couple of years to see how this can be developed? I understand that North American producers are currently exporting huge volumes of wood chips and pellets into Europe. I suggest that Coillte should engage in a strategic examination of this possibility. This work needs to be started very quickly because technology is developing to allow coal-fired stations to be converted. It seems to me that this is an obvious way for Coillte to go.

I note that Mr. Moloney is a director of Smurfit Kappa. I do not know whether that company sources any raw material in Ireland. I imagine that Coillte could be a potential customer. I wonder whether there is any potential for conflict in that respect.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Quite a few other members are offering, but I will allow Mr. Moloney to respond at this point to the questions he has been asked so far.

Mr. John Moloney:

I will make a start on them. I thank Senator Mooney for his comments. I hope I can live up to them. The percentage of land in Ireland that has been afforested has improved. It is greater than 7%. The figure of 7% relates solely to the Coillte estate. There has been a significant expansion in private afforestation over the last 20 years. I cannot give the Senator a precise figure.

On an issue linked to the question asked by Deputy Ferris, Coillte operates approximately 700 partnerships with farmers in the context of assisting them develop their holdings for forestry and to work with them in maximising their value over time. The development of the private forestry sector has been positive. However, it has not grown at the rate or extent it could or should have grown. There are a variety of reasons for this. For example, farmers want to expand their land for farming, however poor the land is and the impact of various grant aid schemes on land availability and the need for acreage. There are also historical reasons, such as we have not had a forestry culture. We had in the past, but not in recent years, although the position has improved steadily. Coillte has not expanded to the same rate in the private sector forestry arena because it was largely driven by grant aid and under state aid rules, Coillte was prohibited from participating. There is nothing wrong with this, once the private sector and farmers are encouraged to see forestry as a viable alternative land use.

In regard to tourism, we have tried to get over the hiding our light under a bushel attitude. Quite a successful event was held in a well known hostelry across the road from here and public representatives were invited to a presentation on public goods. This presentation gave a good perspective on what is done to support the generation of public goods that enables tourism. Coillte manages 2,000 km of marked trails, 150 open sites and 11 forest parks. There is a net cost to the organisation of doing this, of approximately €4 million a year, but this is part of the dividend that flows back from the business. The marketing of Coillte is linked to specific regional projects and this probably gives them the best advantage. Something for Coillte to consider down the road is where there could be a broader open forest marketing designation. The dumping of waste in forests is not good, but I will leave it to my colleagues to comment on that. It is difficult to control access over 445,000 ha.

In regard to the question put by Deputy Ferris on the number of people employed, we have 900 people employed, but I cannot say whether that number will be maintained. The organisation must continue to try to be as efficient as possible. We maintain a significant asset base and must balance the number employed with an asset base which generates relatively low returns, as is the nature of forestry, over a long period. The real return from forestry net of inflation is somewhere between 4% and 5%. Therefore, we need to be very careful regarding the costs involved in managing such a business. Second, inevitably forestry and forest output is linked to the construction industry cycle. The business must be managed very prudently to remain efficient. Therefore, as technology moves on, it is difficult to give commitments.

In terms of indirect activities, it makes sense for Coillte to contract many indirect activities to the private sector, because this activity is dispersed around the country and is linked to harvesting. As the harvesting of saw log increases over time, there is potential for this activity to grow. Technology has moved on. Some 40 years ago or so, harvesting a hectare of forestry would have meant tough, hard, physical labour, but the development of harvesting machines has changed this radically over the past 25 years. As forest estates mature, there is potential in this area.

In regard to a mineral survey, to the best of my knowledge the answer is we have not carried out such a survey. As far as I am aware, the mineral rights to land, apart from sand and gravel, are held by the State. Coillte has looked occasionally at the potential for sand and gravel extraction on the land base, because we maintain a road network of 9,500 km. Therefore, if we can source some of our own material to support this at first cost, this is a cheaper alternative where we have that land. The only area that would have been looked at in the past was the location of sand and gravel, particularly with a view to maintaining our road network, which is extensive. This network is expensive to maintain and is coming under more pressure as we extract heavier loads of timber from it.

On the issue of our relationship with farmers, we have 700 farm partnerships. I believe there is scope for Coillte to deliver advice to farmers, in partnership with Teagasc and the Forest Service as farmers experience with forestry grows, particularly as they come into the challenging phases of harvesting the first thinnings, maximising the value of the crop. A good example of this would be the partnership work done in recent weeks between Coillte, Teagasc, the IFA and the Forest Service on managing the effects of the storms of recent months - advising on how farmers can deal with storm damage, clearfelling and how to maximise the value of this. For many with no experience, the storm damage seems a catastrophe, but Coillte staff have been through this many times and know what to do. Sharing this advice with farmers has been a good initiative for the organisation.

Deputy Pringle asked about biomass. To some degree, Coillte has output and thinnings that could go to biomass. Currently, this material goes to the panel mills. A study completed a number of years ago indicated that putting first thinnings into the panel mills was a better economic proposition than burning it. That is not to be disparaging about biomass. Looking at the situation in Europe, the issue in regard to biomass is that combined heat and power plants using biomass have been driven by grant aid. Support for that has emerged in the UK in the past number of years and in Austria, in particular, approximately 15% of the thinnings of timber output goes into combined heat and power plants. This market is driven by grant aid and needs this aid because of the high capital cost of combined heat and power plants to support that kind of raw material and plant set up costs.

Perhaps a programme like the REFIT scheme that applies in the area of wind or renewable heat incentives in Ireland could have a game-changing effect on this market. Coillte has significant experience on both sides of this. At the Medite combined heat and power plant in Clonmel, we generate over 40 MW of heat equivalent. This is probably the biggest plant of its type in the country. It burns a significant amount of forest waste, sawmill residue and brash, which is the residue after clearfell. I should point out that brash can be expensive to assemble and bring together in sufficient volume and in a format that can be shredded for use. However, if we had a network for that, the transport costs could be reduced which means there may be some opportunities for this in the future. Coillte remains a big buyer of wood chip from sawmills for the panel plants and provides an outlet for that.

I do not believe there is any conflict in regard to Smurfit Kappa, because what we are dealing with there is what is known as product for craft liner from virgin forest. There is no such paper mill in Ireland. The nearest one is in France.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I should remind members that the document we have received is from the chief executive and his fellow directors and that the purpose of this meeting is to hear from the chairman designate his vision for the company. I invite Senator Pat O'Neill to put his questions.

Pat O'Neill (Fine Gael)
Link to this: Individually | In context | Oireachtas source

I welcome Mr. Moloney and wish him the best in his new role as chairman of Coillte. I do not have a particular question. As a Kilkenny man, I have seen how Mr. Moloney turned Glanbia into a world power in the food area. Now that he is involved with a State company, he will have to look at things differently. Some 7% of the land of Ireland is owned by Coillte, but the company cannot really compete for land against private enterprise, because it is not allowed draw subsidies for planting and so on. Therefore, would Mr. Moloney's vision for Coillte involve going into more partnerships with farmers or private companies?

Mr. Moloney is now wearing a Coillte cap in respect of the use of land for forestry, as opposed to his time driving Glanbia, when quotas were going to maximise milk output. I know it is a different type of land, but a lot of good land has been planted as well.

I wish Mr. Moloney the best of luck. I will be interested to come back in a year to see what is happening with Coillte because I know he will change the vision and the outlook of the company, and I think he will make a great difference to it.

Mary Ann O'Brien (Independent)
Link to this: Individually | In context | Oireachtas source

I join all the other speakers in welcoming Mr. Moloney to the committee. It is so exciting for Coillte to have him on board. As Senator O'Neill pointed out, we can look at where he brought the dairy industry and Glanbia. There is no pressure. We cannot wait to see where he will take Coillte.

I am sure when Mr. Moloney arrived in 2013 and looked at the financial figures, he saw that the see-saw effect from 2009 was astonishing, when it went from a turnover of €206 million to €250 million, and the profit went from €19 million to €44 million, and then recovered slightly. The see-saw effect was quite alarming, but particularly in the area of profitability. In 2010, it turned over €250 million and €262 million in 2012, yet it made €44 million in 2010 but only €28 million in 2012. We are very glad to have Mr. Moloney on board and I would be interested in his comments on that area.

Tom Barry (Cork East, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I would also like to extend a warm welcome to Mr. Moloney and I wish him well. He certainly has left Glanbia in great order and it is a very professional organisation with which I have dealt quite a bit. The return to the State from Coillte has been dismal. I think there was a return of €2 million and then €10 million was added to that when Coillte was under pressure because it might be sold off. Does Mr. Moloney see that profit or those moneys returning to the State being more reliable and consistent? Is it his intention to make sure that prime timber goes into logs, as opposed to being sent into lower value products?

Coillte may have sites that may be wanted for development in the public interest or for job creation. I am thinking of the likes of Bottlehill, which was sold to Cork County Council for €15 million at the time. Admittedly that was during the Celtic tiger period, but the taxpayer has to bear the burden of excessive costs for forestry land. Could there be a fairer pricing structure for these sales? I know there is a pricing structure in place with the ESB for leeways going through lands with forestry. Would Mr. Moloney consider changing that structure to a more realistic pricing? We had a situation a few years ago where an elderly man who was living on land with forestry wanted to get power and he was asked for around €80,000 so that power could be brought to his house. Situations like that caused a lot of trouble at the time. Perhaps Mr. Moloney could provide his views on that.

As a person who uses a wood gasification boiler myself, I am a great advocate of using timber for heating. Would Mr. Moloney consider promoting the renewable heat incentive schemes, similar to what they have in the UK? I think one penny per kilowatt hour is supplemented by the British Government. That could be two cent in this country. We need Coillte to come on board for this in order to have a continued supply chain. It is really important at the moment given that 38% of European gas comes from Russia and there is a serious concern about that supply at the moment.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I will go back to Mr. Moloney before we move on to the next set of questions.

Mr. John Moloney:

Senator O'Neill asked about partnership with farmers. There are 700 farm partnerships, but since the advent of the private forestry sector, a considerable number of private forestry companies have emerged as well. Many of them have former employees of Coillte who left the organisation for various reasons. There is quite a lot of support out there for farmers who want to develop their land for forestry. The use of land for forestry must be encouraged. Every individual will make the decision about the use that will maximise the value to him or her in his or her own farming situation, and depending on how constrained they are.

The development of forestry and wind in upland areas, either in carbon offset or carbon sequestration, is also a significant strategic development as the national herd may expand as the dairy sector expands. That is a relevant issue to consider in encouraging forestry, as is the use of upland for renewable power generation under wind, something in which Coillte has been involved. That is part of the land use issues that need to be considered.

In answer to Senator O'Brien's question on the financial performance, Coillte manages a forest estate, and the net asset value of the business made up of the value of the forest and the land is about €1.3 billion. Traditionally, the returns to forestry are deemed as reasonably reliable but low, perhaps 4% to 5% after inflation. In nominal terms, that would be 6% to 6.5%. The outputs of the business are fairly strongly linked with the fortunes of the construction sector across Europe. Some change is occurring in refitting housing with better quality, low carbon materials, such as the panel mills and the new investment we propose to make at SmartPly in Kilkenny. Part of the strategy for Coillte to buffer that volatility has been to use the land resource for other activity such as wind generation, where under the REFIT programme with sites we could develop over time, and which could provide a steady income stream into the future. We could then create a new product range, particularly in the area of panel mills, that can target niches. This is one of the big issues around converting and modernising the SmartPly facility in south Kilkenny. It was designed for an amorphous American market. It is not designed for a multi-niche, valuable niche European market. The intention is to transform the plant with a significant capital investment, for which we have received consent, into a business capable of buffering those cycles. That will not eliminate them, but it can help to improve the financial performance. The third element is to look at the overall efficiency of the business in terms of the costs of managing the forest estate. The AGM will not be until next month, but I can inform the committee that the financial performance for last year will be improved on the following year.

Deputy Barry asked about the return to the State. It depends on how one looks at the return. If one looks at it in raw cash terms, Coillte has paid out around €13 million in dividends over the past three or four years, with €2 million the most recent payment. We have pretty clear evidence, from a number of studies carried out, that the public good aspect of Coillte, in terms of enabling tourism and enabling outdoor activities dispersed across the country, is worth about €600 million to Ireland. That supports an awful lot of rural communities in developing tourism initiatives. In terms of a direct cash comparison, we probably have a total cost of maintaining those activities of about €5 million.

The total cost of maintaining all those activities is approximately €5 million and we recover €1 million from various sources, entrance fees to forest parks and so on, which leaves a net cash cost to the business annually of approximately €4 million, on top of any dividend. It is our intention, as we continue to improve the business over the next five years and the proportion of saw log we produce tends to rise, that the returns should and will improve, together with the development of several ancillary activities. We hope to be able to improve the net cash dividend but also to sustain the public good element of the business. That includes the maintenance and development of other networks supporting tourism which is driven in particular by the increased conversion of mature saw log from the estate, but that is linked to construction cycles across Europe and the 30 countries in which Coillte trades its product.

Coillte has been involved in buying and selling parts of its land over its 25 year history. Since 1989 it has acquired 64,000 ha and sold 16,000 ha. Much of that land was dealt with locally to enable farmers expand their holdings. Some sites have been converted or sold for wind generation in upland regions. Whether the market value is appropriate, Coillte has a balance sheet and has to try to protect that. What is being sought is the market value for whatever the land or issue is. That is the approach the business must take.

In several European countries, and the UK, in recent years, financial support has emerged for renewable heat. That is what will drive it, which I think is what Deputy Barry alluded to. Coillte has an interest in seeing that kind of market develop because potentially it has a raw material supply for that. Part of that raw material and potential raw material goes to the panel mills and will continue to do so, otherwise there is no point in investing in it today. We see a market for those products. Coillte already sells a significant number of cubic metres output into the firewood sector in Ireland. There is potential to develop that in the future.

Willie Penrose (Longford-Westmeath, Labour)
Link to this: Individually | In context | Oireachtas source

I welcome Mr. Moloney. He has demonstrated great success in his previous role, as everyone is aware. This is a particularly important position and I genuinely wish him well. As one who opposed the sale of Coillte and wanted to ensure it remained in State hands, I look forward to hearing Mr. Moloney outline a vision that will achieve that for the benefit of the people.

The dividend returned to the Exchequer has been disappointing. It has been as low as €2 million and it has always seemed to be a fight to extract any significant dividend. I hope that will improve. Mr. Moloney says there are off-balance sheet dividends in respect of the cultural, heritage and recreational contribution. Goodbody Stockbrokers has evaluated that at €180 million and €200 million. It is important if the State is a significant investor that there be a return.

Relatives of mine worked in forestry between the 1950s and the 1980s. It employs approximately 900 people and there are approximately 1,800 indirectly employed in haulage and other areas. The 900 is, however, a declining number. I would like to see that decline reversed because this is important to the sustainability of rural economies, particularly in areas where the Office of Public Works, OPW, Coillte and local authorities provide work. Many areas may be left unplanted for a long time. Why is that so? It does not have the wherewithal or the people to do it. We must continue to replant and resow.

Coillte has existed for 25 years as a semi-State body and commercial organisation. It now has a five year plan for 6,000 ha. That is approximately 1,500 ha less than was set out, which was not achieved. That is my big bugbear. Mr. Moloney set out objectives for Glanbia for diversification and achieved them all, with the help of his executives and everyone else who worked hard. That played a pivotal role in the sustainability of rural economies across the south east and further afield.

Coillte will play a critical role in carbon sequestration and reduction. What particular incentives does Mr. Moloney feel should be put in place to ensure the promotion and development of biomass as a renewable energy source? It is important for dealing with the reduction of greenhouse gas emissions. What can be put in place? It is also important in promoting sustainability in the rural environment because there is a large quantity of raw material available.

I am not as taken with wind energy as everyone else is, because I think it is grossly inefficient and ineffective. I particularly dislike the way it has been imposed on communities without consultation and participation to ensure communities see its benefits. Coillte has a role in this area but I hope Mr. Moloney will take a holistic view of it, that it should be to the benefit of the community and offer a dividend where possible. Energy should be provided to hotels, hospitals and community centres. Let us look after our own before talking about export. I urge Mr. Moloney to ensure Coillte participates with communities. There is significant opposition to the way some corporate entities, which have no feeling for communities, imposed plans on communities without proper consultation. That has led to tremendous antipathy and annoyance and to people doing what they like. The little man or woman in the house or tigín has no say. Corporations think they can do everything. I hope Coillte will not join their paternalistic chorus that they know best. I look forward to Mr. Moloney’s leadership ensuring it does not. Coillte can play a positive role in wind energy but it is not the be all and the end all. It could make a positive contribution to environmental sustainability through biomass and other areas.

Michael McNamara (Clare, Labour)
Link to this: Individually | In context | Oireachtas source

I welcome Mr. Moloney and wish him the best of luck. I agree with him that a dividend is more than cash. The dividend for tourism and related recreational activities has been relatively small. It is important and expanding and many local managers in Coillte do a lot of work in this area. Does Mr. Moloney think there is a problem in the way the dividend is calculated because the legislation provides that Coillte should pay a cash dividend but if it spends money on the development of tourism related activities and resources, that will not generate a huge income for Coillte but will generate one for the locality, whether the Cratloe hills over Limerick or the Wicklow hills? Does that need to be examined or has Mr. Moloney considered whether there might be an expansion of the tourism and recreation related activities?

The dividend of employment generally from the forestry sector in Ireland is pitifully small compared with other EU member states, given the amount of forestry in the country. There seems to be a much larger timber industry and forestry sector in other countries. Perhaps Mr. Moloney wishes to comment on this aspect. Forest management is a much more advanced craft - perhaps I should describe it as a skill or occupation - in countries such as Austria, which Mr. Moloney mentioned in the context of biomass.

Moving on to biomass Mr. Moloney stated there was a perception in Coillte that better value could be obtained in using those first thinnings in the manufacture of boards in the Medite plants, for example, than in burning it. I have no doubt that is true if Mr. Moloney says so and it would seem logical. Can Coillte absorb all the first thinnings into the Medite plants or is there a surplus? One of the difficulties has been supply contracts. Mr. Moloney is correct in pointing out that the financial incentives are probably not sufficient in this country to set up biomass plants, given the capital start-up costs. Beyond that there is a difficulty in securing supply. We had a discussion about securing supply and Coillte seeks to maximise the cash payment it gets for any crop on any given day so it will not want to tie itself up in long-term contracts. Anyone setting up or wishing to invest in a biomass plant will want security of supply for a number of years at least. Might Coillte be in a position to consider this, assuming that there is any surplus supply of thinnings?

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I wish to make some points although I am conscious of time constraints. Mr. Moloney was previously chief executive of Glanbia, a private entity which he developed and which worked with suppliers who were private farmers. Coillte is a multifaceted organisation and it manages approximately 50% to 60% of the forest estate and will manage the more mature forests for another while. Deputy Barry referred to taxpayers' money buying off taxpayers' money. Coillte is a commercial semi-State company which is also involved in research and product development which is probably on par or ahead of some countries with more developed forestry. I refer to the added value of the recreational use of forests. If that is €4 million net cost to Coillte, I think it should be counted in the dividend and more should be allowed for further development. I see significant potential for the Avondale forest park in my constituency - which is well known to Deputy Boyd Barrett - which is the home of forestry in this country. Mr. Moloney noted that many of the privately owned forestry companies have people at the helm who developed their skills working for Coillte. How does he see all the facets of Coillte being part of the ultimate aim of developing a proper forestry industry working closely with the private forestry sector, developing the markets and undertaking research and development and the alternative uses of forests for recreation and renewable energy sources?

Unless Deputy Boyd Barrett has specific questions for Mr. Moloney, I propose he be allowed time in the next session as we are anxious to move on to that session.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I was hoping to ask my questions because I have an appointment at 11.30 a.m.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Has the Deputy a question for Mr. Moloney in his position as chairman designate of Coillte?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Yes, I do. It follows on from the Chairman's contribution. I refer to the vision thing. My view is that we are spectacularly under-performing in terms of the potential for forestry, notwithstanding that forestry makes a significant contribution both economically and in employment terms. We are massively under-performing in all sorts of areas such as in the potential for employment and particularly in afforestation. We are nowhere near the European average, despite the fact we have the capacity to grow trees faster than anywhere else. We cannot meet those targets and this is urgent for all sorts of reasons such as economic and environmental reasons and reasons associated with climate change. Climate change was highlighted in the recent UN report. It seems to me that forests are an answer to a lot of the problems but we have absolutely failed. If we are to succeed, Coillte has to play a central part. How does Mr. Moloney see us changing things so that Coillte can play its part in that delivery? What would he say to me and others who are deeply concerned that there is a problem in Coillte about its identity and focus? It seems to be too focused on short-term commercial and financial questions and not sufficiently strongly focused on the longer-term more society-wide objectives of employment, afforestation, improvement in the mix of species - I ask Mr. Moloney to comment on the question of the mix of species – and the environmental role of Coillte and of forestry generally.

I ask Mr. Moloney to speak about his relationship with the Irish Forestry Unit Trust and about the sale of forests by Coillte which seems to go in the opposite direction of what I would expect Coillte to be doing.

Mr. John Moloney:

I refer to Deputy Penrose’s question. A number of speakers asked about whether the return to the Exchequer is in the form of cash, employment or the public good. I would like to reach an understanding with the shareholder about what is possible from Coillte. It is a business that is relatively low-returning in terms of a return on asset business. One could say it is asset rich and cash poor to a level. That is one of the challenges in saying that X amount of cash is required when the business has a statutory obligation to replant every site harvested, even though some of it might be sub-optimal from a commercial forestry point of view. It may be a case of modification to a lower stocking rate.

We must have a clear understanding with the shareholder about what is required and what is possible from Coillte in terms of a dividend. I refer to "dividend" in the widest possible sense of the word - in terms of cash, public good and supporting other areas from our asset base.

In regard to employment, there are 900 people employed directly in the business and there is very little Coillte area left unplanted. This comes back to the common thread that it is a matter for individual landowners as to what use they put their lands to; that is a decision for them. Clearly, we would be supportive of people planting because we have a vested interest in processing. We take our replant obligation seriously. In terms of employment potential, I referred only to the 900 employed directly in Coillte and the 1,300 or so indirectly providing services. However, there are a further 15,000 to 20,000 jobs in the downstream sawmill and related timber-processing businesses, for which we provide a significant proportion of the raw material. The continuation of that provision into the future is very important.

I do not have a view today about what type of incentive for biomass should be pursued. It seems to me that what has been introduced in the United Kingdom in the past two years has already achieved significant traction in terms of converting to biomass usage.

Deputy McNamara is correct that there is a surplus over what is required in the panel mills. The question of whether Coillte should sign up for exclusive supply agreements is one that will have to be reflected on given the volume of timber Coillte has. In the first instance, such agreements could only be for volume because the market price will evolve over time, but it is possible to work out mechanisms in that regard. Practically, there is a surplus over what is required in the panel mills; theoretically, one could engage in long-term supply contracts, with price being adjusted on an annual basis based on where the market is. I have responded to the Deputy's point about the dividend in the broader sense. It is important that we have a shared understanding about what the dividend from Coillte means as we move forward.

The Chairman is correct that we control a significant part of the forest asset and a significant part, in a concentrated business, of the available sawlog going into the future. It is important that this is delivered to the downstream processing industry, which has also become more concentrated. In fact, five purchasers account for 84% of sales from the organisation. That is a fact of life and it has enabled those purchasers to compete internationally. Again, it goes back to the need to have a definition of the Coillte dividend and what is deliverable across all of the facets.

In response to the point made by Deputy Boyd Barrett, the reality is that underperformance in forestry is a national issue. Coillte has a block of land of some 445,000 ha which it is tasked with managing. In addition, there is a whole private sector element which has evolved and developed to the extent that individual landowners have taken a decision that for their type of land and their location, forestry is a good development. That is to be encouraged. We have not been able to partake in much of that development because we were prevented, under state aid rules, from accessing the grant aid that has driven this forest establishment. Nevertheless, the business is absolutely supportive of providing advice and support - I responded to a question about this just before the Deputy arrived - by, for example, supporting Teagasc and the forest service and helping farmers to assess how to deal with the wind blow from the recent storms. It can seem like a disaster to a new forest owner when that type of blow-down happens, but it can be managed. Coillte staff have been very much involved in that effort.

In terms of our long-term focus, there is almost an advocation that we should get into buying land. My view, however, is that Coillte cannot compete against other land users. We are an advocate of forestry as a viable land-use option for lands of a particular type. In all of this, the trade-off is cash, but we have to replant and recycle capital in the business. When a hectare is cut down, it costs money to put back 2,500 plants. That capital is being recycled in the business on an ongoing basis. It is why cash throw-off in the business is relatively modest.

In regard to species mix, Sitka spruce is the predominant commercial species in Ireland, but there have been developments, particularly on the margins of plantations, in regard to other species, which is helping to take the amorphous look off it. That is to be encouraged.

There was reference to the Irish Forestry Union Trust, IFUT. As I understand it, Coillte did hold a couple of units in that some years ago, but not at this time. IFUT was about a bringing together of a number of Irish pension funds, and Coillte put in some 10,000 ha over 25 years to be run for one harvest cycle. Coillte retained the land and provided management services and, in most instances, sold the timber on behalf of the pension funds involved. At this stage, some 10% of the forestry rights connected to those lands have come back to Coillte, with the remainder to revert in the future. I am not against our involvement in Irish pension funds; it is a legitimate way for Coillte to bring cash into the system under a process whereby it retains the land, sells small quantities of the rights from year to year, manages the land on behalf of the pension funds and facilitates them to sell the timber. Essentially, all the funds are really doing is investing to get the final clear fell, with the rights then reverting back to Coillte. This is helpful in terms of managing the business's cash and the return in the business over time, versus waiting 40 years for it. That is one of the benefits this strategy can bring, as well as supporting a stable, long-term, Irish-owned pension asset within the State. It is not a bad idea.

Andrew Doyle (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Moloney for his engagement with the committee. I have a final comment. A year ago or so ago, before Mr. Moloney joined the board, we had hearings on the proposed sale of Coillte's harvesting rights. Nobody wanted Coillte sold, but everybody wanted it changed. There is a challenge there and from what I know of Mr. Moloney, he is the right man to oversee that challenge.

I propose that we inform the Minister for Agriculture, Food and the Marine that we have concluded our discussion with the chairman designate and forward a copy of the transcript of this meeting to him for information. Is that agreed? Agreed.

We will suspend briefly to allow the next set of witnesses to take their seats.