Oireachtas Joint and Select Committees
Wednesday, 27 May 2015
Joint Oireachtas Committee on Transport and Communications
Peat Briquette Production: Bord na Móna
10:15 am
John O'Mahony (Mayo, Fine Gael)
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I apologise to Mr. Horgan and his officials for the delay in starting the meeting due to a vote in the Dáil. I remind members and witnesses to ensure that all mobile phones are switched off. The purpose of this meeting is to engage with the chairman of Bord na Móna on the cessation of peat briquette production at two Bord Na Móna factories, Littleton, County Tipperary, and Derrinlough, County Offaly. On behalf of the committee, I welcome Mr. John Horgan, chairman, Mr. Mike Quinn, managing director, Ms Geraldine Lynch, head of supply chain, and Mr. Gerry Ryan, company secretary, of Bord na Móna.
I draw the witnesses' attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the Chair to cease giving evidence in relation to a particular matter and they continue to so do, 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. I also remind witnesses that any submission or opening statements they have made to the committee will be published on the committee website following the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I understand that the temporary closures of the plants in question have been referred to the Labour Relations Commission by SIPTU and that management has agreed to participate. It is likely that Bord na Móna representatives may be precluded from discussing certain issues. Obviously, they can clarify that. I call on Mr. Horgan to make his opening statement.
Mr. John Horgan:
I thank the Chairman. I am very pleased to be here. I want to explain to the committee what is happening in Littleton and Derrinlough, where we have two briquette factories. These produce the traditionally well known Bord na Móna peat briquettes. Each year there is a production plan decided for each factory. This year, however, the closing stock, that is, the amount of briquettes that we have in stock at the end of March each year which is the end of our financial year, is exceptionally high. In March 2013, closing stock was 1,500 tonnes and in March 2014, it was 44,000 tonnes. We would normally aim to have in the region of 30,000 tonnes at the end of each year. This year we have twice that amount. To put it in perspective, that is roughly the equivalent of 11 weeks' production. We have never had such a high level of stocks.
Why do we need to do what we are doing? The factories normally stop operations every year in June or July. This year, because of the very high level of stock to which I referred, the production of briquettes at those factories stopped earlier, at the end of March. Typically, when the stoppages occur, there is other work, such as maintenance, to be done. In a typical year, an employee would be on basic rates of pay for approximately five weeks and that is normally managed on a voluntary basis. In effect, that normally means that rather than earning in the region of €800 or €900 per week, employees would drop back to maybe €550 or €600 a week because they would not be shift-working and they would not be in receipt of an element of pay that is related to the amount of briquettes produced in any particular week. In a normal year, they would suffer a loss of earnings.
This year that stoppage has had to be increased. The stoppage this year is for eight weeks - three weeks longer than usual - and there will be reduced earnings due to short-time working this year. Normally, we would not have short-time working, that is, employees working a short week. Some employees for some weeks will only work some of the days of that week. That is what is different this year as opposed to other years. Ms Lynch, who is in charge of the operations at these factories, will be able to go into much greater detail on that.
I will give our estimate of the reasons our sales were so negatively impacted last year. There is a growing problem of unregulated fuel imports from Northern Ireland. We estimate that 50,000 tonnes or 60,000 tonnes, or 10% to 15%, of the domestic fuel market in Ireland is now being supplied by unregulated imports from Northern Ireland and that is impacting on us.
Carbon tax is another factor that has reduced the sales of briquettes. It appears to us that there may not be a level playing field here. Bord na Móna paid over €8.7 million of the total of €17 million that was received in carbon tax. We are paying 50% of the total tax but we do not have 50% of the market. We think we may have 30% of the market.
Private fuels are a serious source of competition for us. We believe that a lot of the private fuel sales are not paying the carbon tax - they are subject to it but it is not being paid - and that the VAT on a large proportion of those sales is not being paid either. There is a question of a level playing field in that regard. That is increasingly undermining our business.
There is also the weather. We are a weather dependent business on two scores - we need good weather in the summer to harvest the peat and we need a cold winter for the demand for briquettes. Last year we had a reasonably good harvest but the winter was not as cold as normal. The winter was reasonably mild and the sales of all domestic fuels dropped and, of course, there was increased competition from home heating oil because its price fell. Those are the reasons we think the sales of briquettes last year were so disappointing and, therefore, the build-up of stock occurred.
As for what we have done, it became apparent to us in December 2014 that there would be a problem and we informed our employees. The employees themselves would be attuned to this anyway. They can see the stock levels. At that stage, we started to draft a contingency plan. From February of this year onwards, we had a detailed engagement with staff and the union representatives about the impending issues. We had ongoing meetings with the unions. At local level, we held five collective meetings where we brought the representatives of both factories together with their union representatives. We assessed with the staff all the redeployment opportunities and we brought forward a capital work plan. We increased by 30% the amount we are spending on capital works this year, from €1.4 million to €1.8 million, and that, of course, provides additional employment in the briquette factories during the current period.
With all those steps and various mitigation measures, we got very close to the stage where this could have been achieved on a voluntary basis. If the weather had been kinder over the past few weeks, it may have been possible to redeploy staff on peat production.
We were very close to being able to achieve this on a voluntary basis this summer. It does not now appear that we will be, because the peat harvest has not started yet, effectively, because we have not had dry enough weather for it, although we hope to be able to start it in the next couple of weeks. Unfortunately, there probably will be times when we will not be able to provide employment for some people who want to continue in employment. However, at this stage we think every employee will be able to be employed at some stage of every week, but not for the full week every week. I am just trying to give the scale of it. That is not yet definite, because we are still in negotiations with the trade unions on the matter.
Production is scheduled to resume on 10 September, as planned, and by that stage everybody will be back in full-time employment and on shift. We are actively reviewing new product developments and opportunities because we want to grow new markets for the briquette business and in order to provide long-term sustainable employment and keep both these factories open and secure, we are working hard to develop new sustainable fuels. We are talking there about a biomass briquette, which is currently in development. This week we have been invited to attend the Labour Relations Commission on the issue. We are looking forward to engaging with the trade unions through that process and hopefully we can get agreement there. If we cannot get agreement on these issues at the Labour Relations Commission, we will, of course, agree to have the matter referred to a full hearing of the Labour Court, if that is what the trade unions want.
We have very serious plans in Bord na Móna up to 2030 and beyond. Mr. Quinn, who is with us, has recently joined us as our new managing director. He joined at the beginning of this year. He has brought to the board a very ambitious investment plan for the future of Bord na Móna and the board has accepted that plan in principle. We have shown that plan to NewERA and to our Department and the response has been very positive. Each element of the plan will be subject to further board approval as to commercial viability and sensitivity. As part of that, there is now an agreement between Mr. Mike Quinn, as managing director of Bord na Móna, and the chief executive of the ESB to keep the peat-fired power stations open. We have one peat-fired power station and the ESB has two. There has been a question mark over their viability in the future. We now have an agreement in principle to keep all three of them open beyond 2019 and to co-fire them with biomass. We are also developing a large-scale indigenous biomass industry.
The Chairman and members will be aware that the Government decided there should be a partial merger of Bord na Móna and Coillte and that as part of that a new company should be established, BioEnergy Ireland. We are taking a strong lead in the establishment of that and in the development of the biomass industry in Ireland. That will secure the power stations and peat production into the future. We also have in progress a transformation programme. This is a company-wide programme to reduce the costs of production and improve the general efficiency of the company. It is a major programme. We are in negotiations with the union and have been for over a year now on that issue. That matter is also in the Labour Relations Commission, but in a separate set of negotiations. Those negotiations will continue today - they have started again this morning. I am happy to report that good progress is being made there. We believe it will be possible in a matter of weeks or months to reach an agreement with the trade unions on all those matters. Very difficult decisions have to be taken because we must reduce the price at which we supply peat internally to ourselves and to the ESB. The price of peat must be reduced by a considerable amount. We recognise, and always have recognised, that this is a very difficult process to go through, but it is necessary to secure the future of the company. We now believe the unions are seriously engaged and recognise the necessity of those cost-cutting measures. Overall, the primary objective of our long-term strategy is to keep Bord na Móna as a major employer in the midlands through 2030 and beyond.
John O'Mahony (Mayo, Fine Gael)
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I thank Mr. Horgan. I will hand over to the members, many of whom are directly affected in their constituencies. Deputy Cowen is substituting for Deputy Moynihan, so he can take the floor.
Barry Cowen (Laois-Offaly, Fianna Fail)
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I thank the Chairman and I thank the chairman, CEO and staff of Bord na Móna for making themselves available on foot of the request by this committee to give us an update not only on the briquette factories, but also on other issues. I am glad that when Mr. Horgan moved to the last chapter of his presentation, towards 2030, he mentioned other issues that are very pertinent to the development and ongoing viability of Bord na Móna. As the chairman rightly said, we know only too well that the future viability of Bord na Móna is paramount to the economic activities of the midlands region and always has been. There has been much change since it was initiated, in respect of the power plants and other changes in work practices, development and so forth. All of that, thankfully, was done by consensus and with the agreement of the workforce and the communities in which they are located. That is why it is in place today and has a chance of survival into the future.
I might break up into three sections the issues Mr. Horgan raised. Before doing so, I am conscious of his role as chair of Bord na Móna. He was appointed by Government, by the former Minister, Deputy Rabbitte. The Government is representative of the people, so he is, by association, a conduit of the shareholders, namely, the public. He acts as that conduit in the best interests of the shareholder. He said when he was appointed and came before this committee in September 2012 that "The board will be collectively responsible for promoting the success of the company by leading and directing its activities". He said it would "provide strategic guidance and monitor the activities and effectiveness of management". I know he was well qualified for the role. He has an MA in industrial relations from the University of Warwick and was a member of the Labour Court for close on 12 years, first as vice-chair and then as chair for five years. Is that right, that it was from 1979 to 1984?
Barry Cowen (Laois-Offaly, Fianna Fail)
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There was great anticipation of his effectiveness as chair and as that conduit. With the knowledge and expertise he had, especially in industrial relations, one would have expected that any change, diversification, alteration in work practices or cost-cutting exercise that might ensue would be well-managed, closely monitored by him and the board in dealing with management to ensure smoothness. One would also have expected morale to be maintained among the workforce and that those amendments would be well-met and well-intentioned and would, in so far as possible, meet with the approval of the workforce.
I want to raise three issues in the first instance. When I say that the operation of the briquette factories was the primary issue raised by Mr. Horgan, I do not intend to demean or diminish many of the other activities that take place across Bord na Móna. The briquettes meet the fuel market. Peat is supplied to the horticultural sector and to power plants. Many people are involved in the servicing and maintenance of machinery and equipment. Everyone is familiar with the workshops and with the apprenticeship model that previously existed. We are aware that seasonal work supplemented the incomes of many farmers and others in the region. Mr. Horgan mentioned diversification. I say all of this to highlight what happened across various areas over many years. I am particularly conscious that the natural lives of many of the power plants mentioned by Mr. Horgan ended in the 1980s and 1990s. A huge effort and commitment on the part of all stakeholders was required to ensure that the lifespan of the peat extraction industry was extended and that this activity continued to play a role in power generation. It continues to do so by virtue of what happens at Edenderry, Shannonbridge and Lanesborough. We are now at a juncture at which those very plants are finding themselves at a crossroads. Mr. Horgan's role and that of the board and management is quite precarious. There is a huge responsibility on them.
I welcome the issues mentioned by Mr. Horgan in relation to biomass. I would like to see more progress on that. He mentioned that there may be developments in the coming weeks. It is essential for the alliance with Coillte in this area to crystallise quickly. Thereafter, there needs to be an effective means by which the biomass industry can be improved upon so that it can take off and be part of the co-fuelling that was mentioned earlier. Those who had foresight back in the 1980s and 1990s were aware that there was potential for co-fuelling in the knowledge that peat extraction would come to an end at some stage. Anyway, I will get back to the briquette factories.
John O'Mahony (Mayo, Fine Gael)
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Perhaps the Deputy might ask some questions.
Barry Cowen (Laois-Offaly, Fianna Fail)
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I have three questions. We have been waiting for three or four weeks to discuss this very important issue. I might add that this is the Aer Lingus of the midlands. We are aware that plenty of time and effort is going into that area. I want to make sure the questions that are being asked during the course of that debate do not arise in this context at any future juncture.
I would like to ask Mr. Horgan about a significant issue that relates to briquettes. I know there are seasonal elements to that sector of the business. We are all aware this has historically been the case. We have had good summers in recent years, particularly last year. The company has suggested that the stockpile which now exists is sufficient to meet the demand the market is placing on it. That is why there have been closures. The big thing here is the carbon tax. When that tax was introduced, the previous Government gave a derogation to Bord na Móna and the briquette factories. I do not have to name names. It was given and it ensured the viability of this sector. It allowed the sector to compete competitively, especially with the market forces in the North. It was reinstated and doubled by this Government. That may be political. It is a political charge on my part. As I have said, the company has a responsibility to the shareholders. What negotiation or consultation takes place at governmental or ministerial level between the company and whoever holds that office at any given time? What consultation did Mr. Horgan have with the Minister on foot of this as it arose? Did he fight the implementation? Did he fight the doubling of it? Has Mr. Horgan spoken to them since? Has he highlighted the effect this has had on Bord na Móna's potential to compete in that marketplace? That and that alone is the kernel of the question as regards the future of that sector. That is my first question. I will try to speed up if I can.
Mr. Horgan raised some broader issues when he spoke about moving towards 2030. He and his management colleagues have sought cuts of up to €24 million per annum in relation to Bord na Móna activities. They have said that such cuts are necessary if the company is to be able to continue in existence beyond 2019. The ESB has said in recent weeks that it is committed to continuing the partnership between its plants and Bord na Móna plants for the supply of peat, regardless of whether it involves 100% peat fuel or some kind of co-fuel arrangement. Is it not strange that Mr. Horgan and his colleagues did not seek to meet, engage with and ultimately agree terms, conditions, contracts and the associated costs with the ESB? If they had reached some indication of what the price might be beyond 2019 and the public service obligation, perhaps they would be in a position to look at the costs and the sorts of reductions that might be necessary thereafter. I think they have put the cart before the horse. Mr. Horgan seems confused as he looks at me. I am saying that he has decided, before meeting ESB or agreeing a contract or a price, that cuts of €24 million are necessary. He does not yet know what the company's deal with the ESB will be. He does not know how long that contract will be, how much it will be worth or what effect it will have on the company's costs. I find that strange.
I will conclude by speaking about the mechanisms that were used after that decision was made to seek its implementation. As I said earlier, Mr. Horgan has much more experience and expertise in the industrial relations area than I have. He has much more knowledge than I have of the Labour Court, the Labour Relations Commission and all the other mechanisms that are available to resolve issues. I know, as do the people and communities I represent, that every effort made by the Government and the board over the years to effect change, meet the demands of market change, diversify and alter was done in consultation and consensus with the workforce. They very seldom went to the Labour Court. I would have expected that to be the case in this instance and in this period of the company's development, especially with somebody of Mr. Horgan's calibre in the position he is in. I understand there are nine or ten issues before the Labour Court. Believe it or not, morale is at an all-time low among the workforce regarding issues of pay and conditions. I hear a great deal of talk around the country about Dunnes Stores, zero-hour contracts and the difficulty being experienced by workforces in assuring their futures in that company and others. Many people have been asked or told to reapply for their jobs. When they have done so, they have found the pay and conditions within Bord na Móna vastly different from what they were before they reapplied. Pay cuts of 30% have been applied in some instances. I find it unbelievable that this has been allowed to evolve. I ask Mr. Horgan to explain to me, considering the role that he is expected to carry out in the interest of shareholders and as the Government's representative, how it is that almost every question asked of management and staff is ending up in the Labour Court.
John O'Mahony (Mayo, Fine Gael)
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I thank Deputy Cowen. I ask Mr. Horgan for a response. I do not want it to get into an over-and-back situation. I am conscious that other members of the committee want to get in here as well. If Deputy Cowen wants to come back at the end of Mr. Horgan's response, that is fine. I want to move on after the response if that is okay.
Mr. John Horgan:
As I understand it, Deputy Cowen is asking whether we fought the Government policy on carbon tax. The answer is "no, we did not". We are required to have regard to Government policy and to comply with it. Having said that, we let the Minister and the Department know on a continual basis of the effects of carbon tax on our business. They are continually updated on that. It is not something we are in a position to take a stance on. The Government has wider issues to consider with regard to carbon tax than its simple effect on Bord na Móna. I assure the committee that the departmental officials and the Minister are continually kept informed of the effect carbon tax has on us. We work closely with Departments on a continual basis to let them know what the effects of prospective and existing Government policies might be.
I was also asked to explain why we are cutting our costs now when we do not know what they will be in 2019.
The answer to that question is that we operate a peat-fired power station. We know the economics of it. The two power stations that the ESB operate are broadly similar to our own. We know what it takes to make our plant competitive and stay in business. Because we lose the PSO this year, we know what the price of peat has to be from next year going into our power station to make it economic. In other words, we have a demonstration project. If we cannot show to the ESB that we can make our project operate commercially, the ESB will not be interested in operating its project on a non-commercial basis. We have never said that we will ask anyone to operate a power station on a non-commercial basis. Our job is to make our plant work next year on an economic basis. When we can demonstrate that to the ESB, then we are in a strong position to say to the ESB that we have done it with ours and therefore the ESB can do it with its project. We know from our internal analysis what the costs would be; therefore, we know the extent of the cost cutting that has to take place.
The third point raised by Deputy Barry Cowen was about industrial relations practices. During my time as chairman - it was probably the first time ever - the board asked the management of Bord na Móna to reach an agreement, a protocol, a broad framework as to how the trade unions and the company would interact. A protocol was agreed and approved by the trade unions and approved at board level and signed off by the board. I am not sure if that had ever been done in the history of Bord na Móna. The management of the company has been operating in accordance with that protocol ever since. It is an agreed protocol. The difficulties that the company and the unions face and the difficulties that face employees are, perhaps, unprecedented, but they have to be tackled. We cannot just pretend that hard decisions do not have to be taken. We have honestly and openly put those proposals to our trade unions in accordance with our protocol. While a number of issues have been through the Labour Court in respect of these changes, I would point out that on every single occasion the Labour Court has found that the company acted in accordance with the protocol agreed and in accordance with good industrial relations practice and has recommended that the employees implement the various changes. It is not unusual for a company that is going through such a difficult period in readjustment to have difficulties in negotiation and for both parties to use the services provided by the State to help resolve those difficulties. That is what we have done, and we will continue to do that.
There was a mention of a 30% cut in pay. I want to say that no basic pay rates in Bord na Móna are being cut or proposed to be cut. Some elements of other allowances and so on are being cut and some people are taking other jobs that are of a lower total remuneration. That is true. All of that is being managed carefully through the established procedures and in accordance with the protocol that has been agreed with the trade unions.
John O'Mahony (Mayo, Fine Gael)
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I will allow Deputy Barry Cowen to come in again later, but I now call Deputy Michael Colreavy.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I thank the representatives for appearing before the committee. My party colleague Deputy Brian Stanley would have been keen to be present because, geographically, he would be more immediately affected by Bord na Móna than me. He cannot be present but I have no doubt he will be buzzing my ear on it when we meet again tomorrow. Please forgive me if some of my questions appear to show a lack of knowledge of the industry.
I find it difficult to have this conversation in the absence of information on the overall financial standing of the company. How many staff are currently employed and how many former employees are on pensions? Perhaps somebody can provide me with that information. I was surprised to hear Mr. Horgan say there is annual planning in terms of Derrinlough and Littleton. Of course there has to be annual planning, but I would have expected it particularly in terms of the joint merger or the joint working between Bord na Móna and Coillte and the establishment of BioEnergy Ireland. I would have viewed that as a hugely exciting opportunity which the company would have been planning for the next decade or decades-----
John O'Mahony (Mayo, Fine Gael)
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There is interference, possibly from an iPad.
Barry Cowen (Laois-Offaly, Fianna Fail)
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From an iPad.
John O'Mahony (Mayo, Fine Gael)
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We are getting feedback on the sound system. Does Deputy Fitzmaurice have an iPad?
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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There is a need for annual planning for specific plants and the need for-----
John O'Mahony (Mayo, Fine Gael)
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There is interference from a telephone.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I think section 31 must be alive and kicking again. If it was my telephone, please forgive me, but I do not think it was.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I ask Mr. Horgan to talk through the annual planning vis-à-visthe longer-term planning for the merged companies. I understand that if the weather is bad it can impact peat production. I also understand that if the weather is good, demand for the product decreases. There are other opportunities. Mr. Horgan talked about unregulated fuel imports from Northern Ireland, which seems to imply there is something wrong with this. What is meant by unregulated fuel imports and what is the impact on Bord na Móna? Is there an opportunity for Bord na Móna to export?I understand the issue of carbon tax. Mr. Horgan said Bord na Móna pays 50% of the carbon tax levy on 30% of the market. That is a startling figure. What is the basis for that figure, and has it been discussed with anybody? If I had a business and was paying 50% of a levy when I thought I should be paying 30% I would be asking hard questions. I am not sure I get the point about private fuels. People are entitled to private fuel; they always have been and always will be.
Mr. Horgan mentioned that a capital work plan had been introduced. He stated that this amount had been increased from €1.4 million to €1.8 million in the briquette factories alone. What is the purpose of the investment plan? Is it to develop new lines? Is it to produce more? Is it to do more with less human input? What problem is being resolved or what opportunity is being grasped with the increase in capital investment in the briquette factories?
The final issue is one I have been asked to raise at this forum. I understand that pensioners in the company have recently been informed that there is a shortage in the pension fund and that a levy will be placed on them.
Can Mr. Horgan tell us about the state of health of the pension fund? How much is going to be levied from the pensioners? One pensioner to whom I was speaking before the meeting said there appeared to be a lot of management consultants around the place. What are they doing and how much are they being paid? If the management consultants were not being paid so much the burden of the levy would not have to be placed on the shoulders of the pensioners. The same pensioner told me that morale was quite low among workers and pensioners in Bord na Móna and that it is actually disimproving. I understand the stresses of industrial relations. When things are going flyingly well people tend to be happy, while they are unhappy when things are tight. There used to be a very good process for liaison between management and staff and between management and pensioners, and the welfare of workers and pensioners was always taken into account, but this seems to have dropped off the agenda of the company now.
Mr. John Horgan:
There are more than 2,000 employees in Bord na Móna, depending on seasonal factors, and there are 600 pensioners. The financial state of the company is very sound and it has been profitable in the last number of years, as it needs to be in order to be able to borrow and invest in new projects, particularly wind farms. The results for this year have not yet been finalised, but when they are published in July they will be favourable and in line with last year.
I will ask Mr. Mike Quinn to talk about unregulated imports. The problem with private fuels is not that they are there; it is that it is not a level playing field, as a lot of the private fuel business is not subject to VAT and carbon tax is not collected, for whatever reason. I am not talking about people cutting down their own trees or harvesting their own peat but about stuff that is sold.
I do not have all the details required to answer the question about the pension scheme. However, the trustees of the pension scheme and the company have been in negotiations in the past few years and this year a scheme was submitted to the Pensions Authority, which has now been approved. It has the approval of the Department and the Minister, so the changes will be put into effect. It took a long time and it was very difficult to get the agreement of the trustees to it, but we have succeeded. All of the company's pension schemes now have in place funding schemes approved by the Pensions Authority.
I did not prepare to answer questions on pensions but, as far as I know, there is no levy on pensioners.
John O'Mahony (Mayo, Fine Gael)
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I think Mr. Ryan wants to comment.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Sorry; I did not hear that.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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It is just the standard levy. There is nothing additional to that?
John O'Mahony (Mayo, Fine Gael)
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That clarifies that.
Mr. Mike Quinn:
Unregulated imports, in the form of product coming across from the North of Ireland without the payment of carbon tax or VAT, really affect our coal business and are having a significant impact, particularly around the Border counties. Our sales of coal in the Border counties over the past couple of years, since the carbon tax was introduced, are down by 70%. The cross-Border traffic has virtually wiped us out in the Border counties.
John O'Mahony (Mayo, Fine Gael)
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It is illegal or legitimate?
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I do not know what the legal position is.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I will tell the Deputy what the wording of the legislation means. If one buys it and accompanies it from North to South one does not pay carbon tax. If a person has his hand around the bag of coal he is sound.
Mr. Mike Quinn:
The second question related to BioEnergy Ireland, which is a very exciting opportunity for Bord na Móna Our peat will not last forever, and stocks will run down by about 2030, so the bioenergy industry will become a significant part of Bord na Móna's business. We have a significant opportunity to maintain employment in the midlands by using the workforce and equipment with which we currently harvest peat to harvest the private forestry sector. The establishment of a willow crop industry within 100 km of power stations is economical, and we are working very closely with the Department of Agriculture, Food and the Marine on that. BioEnergy Ireland will be a very significant part of Bord na Móna's business into the next decade.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I thank the delegates for their presentation. Am I right in saying that Bord na Móna's peat prices have to come from €35 down to €23 or €25 after the levy has gone? The witnesses spoke about biomass, but I have talked to people in Bord na Móna who have looked at the ESB plant in Lanesborough. Is Bord na Móna not clutching at straws in this area? People from Bord na Móna have told me that to feed the plant in Lanesborough one would need all of the county of Roscommon to be planted with willow. The same applies to Shannonbridge. I believe willow does not grow well in bogs - good land is needed - so let us be realistic about this.
Is it correct that the company made €54 million in profit last year? I have been contacted by numerous people who work with Bord na Móna and it seems a hatchet job is being done on workers at the moment. As Deputy Cowen said, the management has been insisting on 30% and is saying, "Sign this or no contract." The company has been using a strong-handed manner, which surprises me, because it is a company I had good regard for. Given the experience Mr. Horgan has in industrial relations, I am surprised that a company that has made a profit of €54 million is doing this.
Am I correct in saying that Bord na Móna bought an oil company a few years ago and also had a coal business? How profitable or unprofitable were they? Can the witnesses give me the figures? Was the oil business, in particular, a bad experience?
I understand carbon tax is not paid on peat but only on peat briquettes. Am I correct in stating that tax is not paid on the peat that goes to the ESB?
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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What must Bord na Móna do?
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I thought it was exempt.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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It is not exempt.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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We have been led to believe it was exempt.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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What do they cost? Is it €4 or €5 per tonne?
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Mr. Quinn said Bord na Móna was teaming up with Coillte. We have to be realistic about Ireland at the moment. We are importing timber for the sawmills from Scotland. Mr. Quinn has spoken of pulp but we have uses for all timbers and we do not actually have enough of them. Am I correct that some kernels are being imported from Africa?
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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They are not too far apart. Bord na Móna has aspirations about biomass but I have done research on willow and know the amount of area one needs as compared with the amount available. I also know about the quality of land which will be required if Bord na Móna teams up with Coillte for spruce or the other trees it grows. We are importing timber from Scotland, manufacturing goods with it and exporting them to England. The competitiveness of the timber market means there is not enough timber. The sawmills can go for 24 hours and we have the contracts but we cannot keep it going. It is lovely dreaming a dream of where we might be but we need to have realism and if the sawmills and the people who are exporting manufactured timber, which is very important in creating employment, get their chunk, I do not think, given the figures I have seen, there is enough to match what Bord na Móna would need.
John O'Mahony (Mayo, Fine Gael)
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Some of the questions have gone slightly off topic but maybe the delegates could answer that question.
Mr. John Horgan:
Deputy Fitzmaurice has very eloquently made the case for biomass, BioEnergy Ireland and the development of a biomass industry in Ireland. It is true we have a problem with biomass and we will have to import large quantities of biomass. The Drax power station in central England is converting to biomass and is building its own facilities in the United States to harvest biomass, where they are also building dedicated shipping facilities to bring it over. One has to think big in this business. The biomass business is the future and we must be part of it. We need to have a biomass industry that will trade and import large quantities of biomass.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Is Bord na Móna expecting to produce peat and supply it to the ESB at €25 per tonne? It will not be able to buy biomass for anything near that. It will cost between €45 to €50 per tonne to import it.
Mr. John Horgan:
If that is the price then there is no future for it. That is why we have to source it at an economic price. At the moment we are price takers but we need to get more involved in the industry and to build our own facilities because otherwise - I agree with the Deputy - we will not be at the races if we just sit back and become price takers. We need to be participants in the business.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I have two other questions. Did any of the hierarchy of Bord na Móna take the 30% pay cut that it is expecting the people who do the work, day in, day out at Mountdillon or in Offaly, to take? It is my understanding that the higher echelons in Bord na Móna have not taken a cut and the ordinary people who do the work on the ground are very upset about it.
John O'Mahony (Mayo, Fine Gael)
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If there are issues which have strayed beyond what was proposed, perhaps the witnesses can supply the answers at a later stage.
John O'Mahony (Mayo, Fine Gael)
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That is acceptable.
Mr. Mike Quinn:
The three power stations will need 1.2 million tonnes to run effectively. Today in Edenderry we are successfully bringing in 330,000 tonnes of biomass, of which 130,000 tonnes are sourced domestically. The Deputy is absolutely right that there is not enough biomass in the country to supply the power stations or the biomass briquettes we need to produce. We also need 90,000 tonnes of green waste for our compost in the Kilberry facility. Given that smokeless coal needs 50,000 tonnes of biomass and that there are some CHP projects on which we are working, in 2020 we will need in the region of 2 million tonnes. Add to that the two Coillte board factories, which need 800,000 tonnes, we are looking at needing approximately 3 million tonnes in 2020. However, that should be seen as an opportunity for Bord na Móna and for this country. We can develop an international supply chain to deliver that. The private forestry sector will be bigger than Coillte by 2030 as successive Governments have invested significantly in grants for the private forestry sector, for which we are getting nothing at the moment. These trees will only come to maturity over the next decade. We are considering how we can mobilise the private forestry sector and have set ourselves a target whereby 500,000 tonnes of the required 3 million tonnes will come from the domestic private forestry sector.
Today we have 650 acres of farmland under willow. The yields from those 650 acres are surpassing our original expectations and we have a target of 5,000 acres over the next three to four years. We are working with the Department of Agriculture, Food and the Marine and Teagasc on that and are confident we will be able to do it. The vast bulk of supply will come from international sources while the private forestry sector is coming on stream. The Drax station in the UK, about which Mr. Horgan spoke, imports 6 million tonnes of biomass per annum and supplies it successfully to power stations, supplying 8% of the UK power industry. It has had a successful conversion on three of its six power stations already. The scale has been demonstrated internationally.
Michael Lowry (Tipperary North, Independent)
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I welcome the chairman and management of the company and thank them for their presentation. I want to address three issues but will start with the two principal issues, as I see them, relating to carbon tax and PSO. Then I want to talk about the relationship between the management of the company and its workforce. The constituency I represent contains Littleton and Templetuohy, both of which have been very productive and are central to the economic and social life of our area. Local communities have developed around Bord na Móna, which is a traditional industry, and relations between the company, the community and its workforce have been very good.
According to the presentation the carbon tax is a major influencer of the downturn in the activity of Bord na Móna. The public service obligation requirement on the ESB and the financial contribution it makes are also an issue. These are the two key issues. Carbon tax was introduced at the insistence of the Green Party during the course of the last Government. I supported that Government and when the carbon tax was brought in I was approached by the unions and management in Littleton, including the manager at the time, Mr. Ray Yates.
There is a man who is about to retire from the company and who has given fantastic service. I worked with him over the years as a public representative and he is a big loss to the company. He enjoyed the confidence of his workforce and is what I would call a proper manager. I want to put that on the record. When that issue came up, I raised it directly with the then Minister for Finance, Brian Lenihan, before going to the Taoiseach of the time, Brian Cowen, who was intimately aware of the consequences of the imposition of carbon tax on briquettes. It was agreed in that budget that there would be a derogation, and that there would be no carbon tax on briquette products. We moved on then and the current Government has twice slapped a carbon tax on these products, which has made them uncompetitive and is creating a serious problem.
The second issue concerns the public service obligation levy, PSO. It is not a coincidence that the reduction in the PSO equates to €24 million, while the savings Bord na Móna is expecting from staff are also approximately €24 million. What I cannot understand is, the ESB is a very strong company, financially.
We have recently heard - I welcome this publicly because I think it is a good move - the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, announce to much fanfare that the Government was going to invest heavily in initiatives to maximise employment and revitalise local economies in rural areas. This announcement came after much pressure from rural Deputies like myself, particularly from the Minister's own rural backbench Deputies. Bord na Móna is a typical example of a rural-based company. It is the only opportunity for employment in the areas in which it functions. Mr. Horgan is appointed by the Government and has a direct link to his line Minister. I am surprised to hear him say that he has not really got anywhere with carbon tax, apart from the normal submissions he would make to the Minister. There is a budget coming up again and every lobby group in the country will be making submissions to the Minister. Mr. Horgan should go through his line Minister to inform the Government of the consequences of its action. The opportunity exists for him to do so now in advance of this budget, and he should avail of it and put his case very strongly. He will not just be representing his board, he will be representing the views of the workforce. Two issues I feel have to be addressed are the PSO and biomass.
We are told biomass briquettes are the way forward and Bord na Móna has its biomass project. Will the biomass be available for the production of briquettes or will it be directed to the peat power plants? Has Bord na Móna got a five-year plan for the Littleton briquette factory? I come from a place called Thurles, and over the years we have suffered in that we have lost all our manufacturing industry in that area. One time we had four sugar factories, but Thurles lost out and eventually all four closed. We have two briquette factories now, Derrinlough and Littleton, and there is a concern that there is a hidden agenda. The two may become one and eventually, the one may not exist. I would like an assurance today on the future of Littleton briquette factory.
Mr. Horgan used what I would consider to be labour commission lingo on how Bord na Móna is managing the transition and savage cuts that are taking place. He says a framework and a protocol have been put in place and that the company is carefully managing this exercise. I am not one to exaggerate and am normally quite calm and measured in what I say. Although I do not go seeking to meet with the workforce in Littleton, they have come to me. I have received letters addressed to myself and copied to the chief executive, Ms Lynch and others within the company. I have no intention of putting that correspondence into the public domain but I hope Bord na Móna has a mechanism within the company to deal with it adequately. Some of the content of those letters and messages is frightening and I sincerely hope that not even an element of it is true or accurate.
I would describe Bord na Móna's situation as being in crisis. In a time of crisis, resolute action and a plan are needed. Having met practically all of the membership of the Bord na Móna workforce in the Littleton-Templetuohy area, either collectively or individually, some of them in my office without the knowledge of their colleagues, there is disillusionment, frustration, anger and huge resentment building up against the management. People feel the management's method of implementing cuts and cost saving measures is harsh and inhuman - this is why I am talking about this lingo of "framework" and "protocols". What we are looking for here is basic decency in terms of how the management deals with people who are working with Bord na Móna for 25 years. The workforce of Bord na Móna has been dedicated, committed and loyal to the company. We never had this kind of difficulty with industrial disputes; I have never seen such a reaction in my 28 years in politics from the company's workforce. The management needs to face up to the reality that it, starting with the chairman, has lost the confidence of its workforce. It needs to address this as a matter of urgency.
Part of the reason this confidence has been lost is that the workforce does not trust management to have a plan that is achievable, has proper objectives and can deliver sustainable jobs and safeguard the future in these plants.
There is a perception among the workforce that management has squandered money in many of its investments. Its core business has always been the peat plants. It has taken its eye off the ball. The buzzword is diversification and I understand as a commercial person and a businessman why people have to diversify. However, management must hold sight of what its core business is. It is still making €50 million profit out of its core business at a time when it has squandered millions on waste management, made bad investments and lost out heavily, spent a fortune on wind farms for which I am not sure what the dividend will be. From my understanding, Bord na Móna has also spent tens of millions on consultancy fees and reports, the end product of which nobody seems to know. Showing its lack of political astuteness, it spent a fortune bidding for the Irish Water franchise, lost out on it and dug a big hole in its balance sheet in preparing for it. I would have thought somebody in the Government or in Bord na Móna would have realised halfway through that process that the company was not going to get it and that it should desist from it. That is the perception among the company's workforce at the moment. The management has lost touch in respect of the kind of expenditure it has in seeking diversification projects that have been expensive.
I have no problem supporting a management with a difficult job to do and I will support the management of the company. However, it needs to communicate its message a lot better. I do not believe that communicating through the Labour Relations Commission is the way to do it. Why do we have to step away from the old procedures that always worked within Bord na Móna? The company now has ten issues at the LRC, of which Mr. Horgan is a former chairman.
I am sure Mr. Horgan, when he was chairman of the Labour Court, did not like having his door opened every other day to deal with spurious claims and issues that should have been resolved locally. One would expect many issues to be resolved long before they reach the Labour Court. The majority of the issues arising in Bord na Móna should have been dealt with by the company's management. I apologise to the Chairman for taking such a long time but we have reached a crossroads in respect of the future direction of Bord na Móna. We need some satisfactory answers and the company needs a solid plan for the future.
Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Chairman for giving me the opportunity to ask questions. I will focus on the final slide in the presentation which has the title, Towards 2030. I propose to address specifically the area of transformation and the work of the organisation in the period until 2030.
When Mr. Horgan appeared before the joint committee in September 2012, he stated he was proud to be the chairman of the board of a company that had a management team of exceptional individuals who had the capacity to lead the company to continued success in the years ahead. Why, in an organisation with a senior management team of exceptional individuals who have a capacity to lead the company, is it necessary to pay such high consultancy costs? I understand €14 million was wasted on consultancy fees last year. Precisely how much has been spent on consultants since Mr. Horgan's appointment as chairman three years ago?
Bord na Móna staff are facing lay-offs and being bullied into accepting new contracts. They are being told that if they do not surrender their current contracts and sign new contracts, they will be left with nothing. The new contracts provide for salary reductions of up to 30%. Are senior managers in the company also facing reductions in salary of 30%?
At our meeting in September 2012, Mr. Horgan also stated that one of the key roles of a chairman is to organise discussion and ensure board members are informed. Why has he prevented the managing director from meeting the four directors elected by employees, especially given the challenges facing the company and the key role these directors have in facilitating solutions to these challenges? Why has Mr. Horgan imposed such restrictions on the elected directors engaging with employees, thereby preventing the necessary feedback to the board?
At the meeting on 20 September 2012 at which Mr. Horgan described his key role as being one of organising discussion and ensuring board members were informed, he was also asked about staff morale in Bord na Móna. Like Deputy Lowry, I have been contacted by a number of Bord na Móna employees living in Lanesboro, Rochfortbridge and further afield. If what they tell me is correct, it is nothing short of disgraceful that such events are occurring in a semi-State company. When asked about staff morale in 2012, Mr. Horgan stated he was aware of issues but did not necessarily agree with them. I am informed that up to 300 cases of alleged bullying are in process. If that is not a serious indication of morale in Bord na Móna, I do not know what is.
I was asked a question about a specific investigation involving an employee that involves serious deficiencies, including lack of due procedure and courtesy. As previous speakers noted, these types of cases were not the norm in Bord na Móna. People whose families worked in the company for generations speak of family members who always had great pride in the company. However, speaking to workers nowadays, it is clear that pride is the furthest thing from their minds when they think of the company.
Robert Troy (Longford-Westmeath, Fianna Fail)
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They have not had a 30% decrease.
Robert Troy (Longford-Westmeath, Fianna Fail)
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Was €14 million not spent on consultants?
John O'Mahony (Mayo, Fine Gael)
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We will allow Mr. Horgan to respond before taking any further questions from members.
Mr. John Horgan:
To clarify, I understood Deputy Troy stated that €14 million had been wasted. That is not true.
The Deputy alleged that I prevented board members from meeting the managing director. That is not true. Such a meeting took place yesterday. All board members are treated equally and it has never been alleged to me by any board member that he or she was not treated equally. The law requires that all board members have exactly the same duties and responsibilities and that requirement has been scrupulously observed in Bord na Móna.
There are not 300 bullying cases in process or anything like that figure. I do not know the actual number that are in process at the moment. Procedures are in place for dealing with employees' grievances and there are many different ways of doing so, including through the trade unions and grievance procedures. There is also an employee assistance programme. These procedures are standard or better than in most of Irish industry and are operated fairly and impartially.
To respond to Deputy Lowry, as the Deputy stated, most of his points were political. As such, it would not be appropriate for me to comment on them. I do not have a note of any specific question he raised that I can answer. If I inadvertently missed a factual question, I will be pleased to answer it. If it is an opinion, I respect the Deputy's opinion but-----
Michael Lowry (Tipperary North, Independent)
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Does Bord na Móna have a five-year plan for the Derrinlough and Littleton briquette factories? Will Mr. Quinn outline his vision for the future of these plants? I ask him also to outline the efforts the company is making to lobby the Government on carbon tax and the public service obligation. It is perfectly understandable that Bord na Móna would need to lobby the Government on these issues.
Mr. John Horgan:
We will continue to make it clear to the Government and officials of the Department what will be the effect of any proposals, including carbon tax, on Bord na Móna. Many proposals are discussed in Departments and among Ministers. Some of these are implemented, while others are not and we make our views known on them. However, it is not our business to oppose them, as such. We make our views known on them and indicate as best we can what would be their effect on the business. That is as far as we go. We do not adopt a political stance on any Government decision.
We are required to have regard to all Government policy and we do that. There is no plan to close either of the two briquette factories. There are plans to keep them in operation. If the Deputy likes, Mike Quinn will talk about those plans.
Michael Lowry (Tipperary North, Independent)
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That is the main issue today. It is one thing to keep the plants open but at what level will they be functional and operational? What is the future for the existing employees?
Mr. Mike Quinn:
The plan is to move the factories towards biomass briquettes because of the carbon agenda. They will be 50% biomass and 50% peat. We are in the process of installing a trial plant in the Littleton facility, which will start in August and will produce approximately 20,000 tonnes of biomass briquettes over the winter. Those 20,000 tonnes will be rolled out to various seed customers to see how the briquettes perform. Our intention and strong belief, because we have put a great deal of research and development into this, is that those briquettes will be successful and we will begin over the next 24 months to convert the briquette factories to biomass briquette. Each factory will require an investment of approximately €10 million to convert it to allow it process the 50% peat and 50% biomass. That is a long-term project.
Another member asked whether the biomass would go to the power plants or to the briquette factories. Only one of our power plants, Edenderry Power Limited, EPL, in Edenderry, buys biomass. The ESB plants will not need large-scale biomass until 2019. We have a biomass stream separate from the briquette factories that will be dedicated to them and that will have no bearing whatsoever on the power plants.
John O'Mahony (Mayo, Fine Gael)
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I will give everyone two minutes to respond to the answers to their questions.
Barry Cowen (Laois-Offaly, Fianna Fail)
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Mr. Horgan confirmed to Deputy Fitzmaurice that the profits were €54 million last year. Can he confirm that he is heading for a higher figure this year, based on initial figures? In what year was the protocol he mentioned agreed and against what background? Was that prior to the present and continuing round of transformation? As I and other Deputies have said, the issue at hand for many members of staff is that they are being asked to reapply for their jobs and the pay and conditions in the contract associated with that job are very different from those they had the day before they applied. Pay is greatly diminished, the location is further away and the costs associated with getting to work are such that it is not viable for the people involved. Will the staff discommoded in such fashion be offered voluntary redundancy? Can Mr. Horgan give that commitment? With Mr. Horgan’s background and expertise in industrial relations, it is a poor vindication of the mechanisms, whatever they are, that every form of negotiation or consultation is taking place in the Labour Court.
The region and constituency I come from would not exist were it not for Bord na Móna and the ESB. We would not have won all-Ireland matches, nor would we have the Kilcormacs, the Cloghans or the Bracknaghs in my region. There would be no life or hope for those towns and villages. There is little hope as it is. If I get too political, of course I will be stopped, but there is a crisis. Huge changes have to take place but huge change has taken place. All the stakeholders have sat around the table, come to an agreement, moved forward and progressed. We have survived and moved on and Bord na Móna has diversified, some good, some poor. The current situation and the manner in which changes are taking place will leave us further decimated because there is no future based on the sort of prerogative employed. What is the protocol? When was it agreed and against what background? It was not against a background in which the employees were being asked to have their work practices turned upside down soon.
Mr. John Horgan:
I have not yet seen the fully audited accounts for the financial results for this year so I cannot say precisely what the figure will be and it would not be appropriate for me to announce them yet. I do not want to go any further than to say we expect them to show a profit, roughly in line with performance last year. I have seen the management accounts. I would prefer not to go any further. The full results will be announced in due course.
As far as I can remember, the protocol was agreed some time in 2012 or 2013. It was negotiated between the management and the company. It is right that the board is responsible and takes ownership of the overall framework within which negotiations take place but I as chairman do not get involved in the detailed nitty gritty of negotiation. That is a matter for the company negotiators. It would be entirely inappropriate for me as chairman to ask whether they can offer a bit here or there. I do not do that and will not do it.
I do not agree that the company has operated outside the agreed protocol. This is a fully unionised company. The trade unions represent the employees fully and we have people who engage full time with the trade unions on all these issues. I know the negotiations are done in a proper way with the trade unions. The issue is put forward to them. Of course sometimes a company proposes something and is prepared to concede on aspects of it and that is what bargaining is about. One listens to what the other side says and withdraws some of the harsher measures and trades them for others because that is the way negotiations operate. I am not going to comment on whether there was a proposal to reduce anyone’s pay by 30%. If there was it may have been part of a negotiating proposal. I would not be aware, and neither should I be expected to be aware, of the details of what takes place in those negotiations. The trade unions are very careful to ensure this does not spill over. They do not want negotiations in the public domain. I am being as open as I can in respect of what is taking place in those negotiations.
Barry Cowen (Laois-Offaly, Fianna Fail)
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As a representative of Government, and by association a representative of the public and the shareholder, Mr. Horgan believes a protocol is in place and, as chair of the board, he is being informed by management and by worker directors and staff that almost all items pertaining to industrial relations now end up in the Labour Court, which goes against the grain and the thread of industrial relations in that company for the past 30 to 40 years. Would he not say that it would be incumbent on him, as that conduit, to say whatever protocol they have is not working? Would he not ask them to renegotiate a protocol that will work and keep them out of the Labour Court, he knowing full well how wrapped up those issues become in the Labour Court, having served on it for 12 years and been chair of it for five years?
Mr. John Horgan:
It is simply not true that all issues end up in the Labour Court. Very few - a tiny proportion - of the issues raised go to the Labour Court. The unions are at this very moment working hard and have committed to doing their utmost to ensure the issues that stand between us, which are difficult issues and there is no denying that, can be resolved at the Labour Relations Commission and not at the Labour Court. They have told us they are determined to do that. It is simply untrue.
Barry Cowen (Laois-Offaly, Fianna Fail)
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It is not. They are not all telling us lies.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I thank our visitors. I think there is a difference between the expectation and the actual. Workers were entitled to expect, when all the publicity was there about diversification, that job security, the standards and the hours they work would be protected.
That was one of the reasons put forward in terms of merger and diversification. The industry employed approximately 4,000 people in the 1980s and currently employs approximately 2,000. On the one hand we are talking about diversification and securing employment while on the other hand we have seen a dramatic reduction in employment and the consequential impact on the communities in which those jobs were held. There is also a major impact on the income of people working in those industries. We can all empathise with the problem that creates. If someone has a fixed income coming in every week or every month, he or she depends on it, and a reduction would have a big impact. Surely some way could have been found to look at the issue under the heading of diversification or whatever else to find alternative employment in the event of the weather being bad and not conducive to saving turf or if sales are not as good as projected.
It is interesting to note that there was no reference in today's discussion about the potential for exports. We complain about imports from Northern Ireland but no mention at all was made of potential for exports. Have we given up on peat?
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Yes, please.
Mr. Mike Quinn:
We have a horticultural business that turns over approximately €52 million, and what is called a professional horticulture business which turns over approximately €23 million and the balance is a retail growing medium, by which I mean the stuff one buys in B&Q or Woodies and other such outlets. It is for the hobby market.
One of the first things I looked at when I came in was that industry because it has a huge potential for Bord na Móna. We have between 40 years and 50 years of stock raw material available to us. Three weeks ago I spent a week in Holland, Belgium and Germany visiting customers and other potential avenues for peat. I see that as a major growth area for Bord na Móna going forward. The UK is another very strong market for us. We have the B&Q account, which is our largest account, and we probably have about 30% of the UK market, but that leaves another 70% to go after. That is key for Bord na Móna. When our energy peat runs out, that horticulture business will survive for decades to come.
John O'Mahony (Mayo, Fine Gael)
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That is good to hear. It is a very positive point.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Mr. Quinn spoke about the new mix of 50:50 peat and biomass for the new briquette Bord na Móna is bringing out. Will the briquette be dearer than the current peat briquette? Bord na Móna sells peat currently for €23 a tonne or €25 a tonne, and it makes briquettes from some of its stock, and so it can produce a briquette much more cheaply. How much will profits be reduced by the purchase of biomass material, which will make up 50% of the new briquette?
I also have a question for Mr. Horgan. I asked whether senior management had taken a 30% pay cut. He said that it was outside the matters under discussion. However, Bord na Móna will be an employer up to 2030. We have all met delegations of workers who have come before the Oireachtas and spoken about a reduction of 30%. Is the cut being implemented across the board in the company?
Could Mr. Quinn indicate whether it is true that Bord na Móna does sod peat for percolating areas, be it in Holland, Italy or Germany and how much is the business worth?
Mr. John Horgan:
I wish to make one point in relation to pay cuts. I have asked Mr. Quinn if he has any objection to my saying this and he does not. It is that his salary is in the region of 30% less than the salary that was offered to his predecessor when he joined the company. To be clear, his predecessor had his pay cut during his term of office, but Mr. Quinn’s starting salary has been cut again and is now in the region of 30% less than the starting salary that was offered to his predecessor.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I do not want to know the exact pricing. I simply wish to know the approximate percentage.
Mr. Mike Quinn:
It is about 15% higher at the moment but we are very confident that with the international supply chain we are putting in place, we will get that down to at least par. That has to be our goal. If we achieve a similar price for the peat and the biomass, the briquettes will not be more expensive.
Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Does Mr. Quinn think that Bord na Móna will lose market share given that peat briquettes coming in from Estonia and other places are being sold more cheaply than the price at which Bord na Móna can produce them? I would be the first to say that they may not be of the same quality. If the price of the biomass briquette increases, which will be the case until Bord na Móna can refine the product and get more of it, will market share be lost? In addition, does Bord na Móna envisage losing market share in the next few years in the horticulture business in England where there is a huge drive against the use of peat? Mr. Quinn said Bord na Móna is seeking to capture some of the additional 70% of market share in the UK. From what I am aware, there is a huge clampdown on peat in England. Am I correct in that regard?
Mr. Mike Quinn:
Yes, the Deputy is correct. Government policy in the UK in the past three to four years has been to move to a peat-free product by 2020. That has been unsuccessful. Now the policy is for a voluntary exit from the use of peat. None of our main customers has exited from peat and there is no drive from government policy to do that. In fact, some of the peat-free products to replace ours have failed miserably. Growers want peat. Until the government convinces the growers, there will be no exit from peat. Currently, there is not a viable commercial alternative to peat.
Michael Lowry (Tipperary North, Independent)
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I welcome the fact that Bord na Móna has made a commitment on the future of the briquette factories at Littleton and Derrinlough. I urge the witnesses to maximise the employment potential of the Littleton briquette factory.
Bord na Móna should document its position on the public service obligation and carbon tax and the impact they will have on the finances and revenue of the company. That should be circulated to every Member of the Oireachtas and, in turn, each Member should make their feelings known to the appropriate Minister, in this case the Minister for Finance. We need to know in precise numbers the cost of the decisions to Bord na Móna and how will it impact in the future, in particular in terms of employment.
The ongoing negotiations involve very difficult times for the workforce of Bord na Móna, many of whom are very long-serving employees of the company. I urge the witnesses to treat them, please, with dignity and respect, and with the courtesy they deserve. If protocols have to be changed to do that, then the company should, please, change them.
Robert Troy (Longford-Westmeath, Fianna Fail)
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I wish to follow up on what my colleague, Deputy Lowry, has said about treating staff with the dignity and respect they deserve. Quite frankly, staff do not feel they are being treated in such a manner currently. I repeat the question about the number of ongoing cases of bullying and harassment within Bord na Móna. I am told the number is very high. I suggested there were 300 cases but I was told that was not right, but at the same time the number of cases was not quantified.
I also asked about the money spent on consultants. Could the witnesses confirm that €14 million was spent on consultants last year?
Can Mr. Horgan quantify how much has been spent on consultants in the past three years since he assumed his role within the organisation? When I asked a question about preventing board members from engaging with employees, Mr. Horgan said that was no longer the case and that the chief executive officer had had a meeting with employees yesterday. Is Mr. Horgan satisfied that his board members, particularly worker director board members - Mr. Horgan stated there was no difference between any members - are engaging with the employees? My colleague Deputy Cowen alluded to the high percentage of disputes ending up in arbitration in the Labour Court, but Mr. Horgan said this was not the case. I have a letter from one of the unions which states that its shop stewards and local management had not resolved any local issue in the past 14 months and very little has been resolved with the involvement of HR and union officials. I ask Mr. Horgan to quantify what percentage of disputes have ended up in the Labour Court.
John O'Mahony (Mayo, Fine Gael)
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Does Deputy Corcoran Kennedy wish to contribute?
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I am not a member of the committee so I am at the disposal of the Chair as to time.
John O'Mahony (Mayo, Fine Gael)
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I will allow two minutes for questions at this stage.
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank the Chairman for the opportunity to ask questions at this meeting. I am from Offaly, so Derrinlough is my main interest, but both Littleton and Derrinlough are very big employers in their respective areas. In a rural area, 61 employees is a lot, and the same applies in Littleton.
Has the company decided how it will clear the stock, which amounts to 44,000 tonnes? Will it consider a discounting policy in order to sell the stock?
What efforts is Bord na Móna making to encourage farmers in the locality to provide biomass to the best possible extent? A large quantity of biomass is being imported and the use of local supplies would be preferable and very helpful. I am receiving representations from workers and their unions who are concerned about certain issues that may have been raised by other members. I appreciate that we cannot discuss ongoing negotiations. The feeling I have got is that change is happening and it might be useful if the company entered into greater engagement with the workforce about the type of change involved. The workers are fearful for their future. Many of them have been good decent and loyal workers. Bord na Móna is a highly respected company in the midlands and it has a tremendous reputation. However, the workers are the ones who contribute so much to that reputation and they are the people we politicians are concerned about, because Bord na Móna employs so many people. We want to ensure that the workers are happy and contented in their employment and that there are no fears or concerns for their future. What kind of engagement has the company had with the employees in order to alleviate the concerns I hear from them, such as reductions in salaries and forced redundancies? We need to be 100% clear in that regard.
Mr. John Horgan:
I wish to clarify something for Deputy Troy so that there is no misunderstanding. I referred to a meeting between worker directors, the chief executive and myself. That meeting took place yesterday, but it was a once-off. All members of the board are treated equally and are required by law to be treated equally. I have made it clear to the worker directors that it is not appropriate that some directors operate in a different fashion or that any directors have direct access to employees. All directors have exactly the same duties and responsibilities. That has been made clear. Worker directors are not representatives of the employees on the board; they are the same as every other member of the board and are treated accordingly. I have made that clear since I became chairman, and that will remain the position because that is what is required by good governance. I do not need to emphasise to any joint committee of the Oireachtas the importance of good governance. I am determined to ensure that all directors are treated equally, that they exercise the same duties and responsibilities and that there is no special treatment for any particular group of employees by directors. I wish to make that clear.
Robert Troy (Longford-Westmeath, Fianna Fail)
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That is contrary to what Mr. Horgan said in September 2012 when he spoke about his role as chairman as being open, facilitating discussion and ensuring that the directors were kept informed of what was happening. I would have imagined-----
Mr. John Horgan:
I have never made a distinction between one director and another. It is my job and it continues to be my job to ensure that all directors are fully informed equally so that they can undertake their onerous duties. That was made clear in a letter I sent to every employee of the company last year prior to the election of the current group of worker directors. Every employee was aware of that when he or she voted for it and every person who stood for election was aware of it before they put their name forward for election.
I will ask Mr. Quinn to deal with the other issues.
Mr. Mike Quinn:
I will respond to Deputy Corcoran Kennedy's question about biomass. The field has changed for Bord na Móna in the past two to three weeks because we have received confirmation from the chief executive officer of the ESB that we will keep the three power stations open post-2019. That allows us to provide 15-year contracts to farmers out to 2030 if they wish to convert to willow. We have had several meetings with the Minister for Agriculture, Food and the Marine, Deputy Coveney, and his team to put together a package for the next budget round, which is a grant package for the establishment of willow along the lines of the forestry grants in the past. We must await the outcome of the budget, but we have made a very strong case and submission on that ground, which will make it attractive to the farmers to sign up for long-term deals. The willow industry has the potential to become a significant employer in the midlands. I will deal with that aspect in more detail tomorrow with Offaly County Council.
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I asked a question about the stock.
Ms Geraldine Lynch:
Our clear intent is to sell all that stock. We are selling a significant quantity of loose briquettes in both our facilities, Derrinlough in County Offaly and Littleton in County Tipperary. That sale is proceeding well. When we come back into production in September, our desire is to sell all of the stock in the factories, in spite of some of the challenges that my colleagues have articulated here. It is certainly our intention, and we have a strong sales force and a loyal customer base. We will be pushing very hard to sell that stock.
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Will it be discounted in order to move it faster?
Mr. Mike Quinn:
We had a particular circumstance last year that hurt sales, relating to private timber that was left over from the big storm in 2013. It is our expectation that a significant quantity of that timber has been used in the market, and we expect briquette sales to be strong next year, weather permitting.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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I refer to Mr. Horgan's comments. I understand his point about good governance, meaning that everyone on the board is equal. However, I think he needs to clarify that it is entirely in accordance with good governance and sound governance that worker representatives on a board have a responsibility during and between board meetings to protect and promote the workers' interests as well as the interests of the company.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Mr. Horgan does not agree with that?
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Then what is the point in having worker representatives?
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Workers are under the misapprehension that the people they nominate onto this board will, in some way, protect their interests during board discussions.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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In my limited discussion with employees in the industry, there is no such understanding.
John O'Mahony (Mayo, Fine Gael)
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I presume that all of the board would have the concerns of the workers at heart.
John O'Mahony (Mayo, Fine Gael)
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It should not be just two. I am trying to-----
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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There is a fundamental misunderstanding. The workers expected and still think that the worker representatives on the board have a particular responsibility to represent the interests of workers in addition to the interests of the company because both, obviously, should be-----
John O'Mahony (Mayo, Fine Gael)
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Maybe that issue is not for this forum.
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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It needs a change in legislation.
John O'Mahony (Mayo, Fine Gael)
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I would expect that all members of the board would represent the views and interests of workers. I suppose we are getting involved in the internal processes, which are not really for us to-----
Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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We may need to look at the legislation.
John O'Mahony (Mayo, Fine Gael)
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The points have been made.
John O'Mahony (Mayo, Fine Gael)
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Deputy Troy had a question.
Robert Troy (Longford-Westmeath, Fianna Fail)
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In regard to the number of disputes which are ongoing, I asked about the percentage that are dealt with locally within the organisation as against the percentage that end up in the Labour Court. I also asked about the money that has been spent on consultants since Mr. Horgan assumed his role.
Mr. John Horgan:
The proportion of disputes is a very difficult one to pin down because there is the question of what is a dispute. If we include something that is resolved at local level at first instance, as most disputes are, then maybe 1% of issues go to the Labour Court. When does an issue become a dispute? If I have a disagreement with my manager, and I talk to him about it and we resolve it, that is a dispute that has been resolved locally. If we include that in the proportion, then I would say maybe 1% of disputes get raised to the highest level.
If we include the proportion of issues that are discussed nationally with the trade unions and then go further, I do not know, but it is probably something like 20%. However, I would not have that kind of intimate knowledge of how those things are resolved. Lots of things get resolved in the corridor, presumably, between the union official, the negotiators and the HR department. Most things are done in that sort of way, although there is also a formal process.
If the Deputy's question is related to the proposals the company made as part of the transformation process, in some areas, some of those have been resolved entirely. For example, the financial shared services issue has been resolved and that is operating with, as far as I am aware, no outstanding issues on that side.
In regard to the transformation process on the peat production side, as I understand it, the unions have adopted the position, which we are quite happy to go along with, that nothing is agreed until everything is agreed. There is a large number of issues - up to 20 or 30, depending on how one defines them. We have been through the first round of discussion with the unions and our proposals have been put to the unions on all of those on the basis that nothing would be agreed until everything is agreed. The unions then asked us for time to consider those and asked that they would employ consultants - which we paid for, of course - to have a look at and help them with the proposals. Those consultants took some time and produced a report for the trade unions. On the basis of that and other information, the unions then asked us for a further extension of the time they had agreed in order to prepare an alternative plan. We said we were happy to listen to their alternative plan.
This morning, at this very moment, the trade unions are presenting their alternative plan to us in the Labour Relations Commission, as agreed. We will look at all of those alternative proposals to see whether they can be accommodated. If they can be accommodated, we will be happy to do that. However, the unions have agreed with us that the bottom line is the savings must be made. They are proposing alternative ways of arriving at the savings and we have said to them we will be happy to accept their alternatives, provided they are real savings and will add up to what we want to do.
That is the proper strategy for the company to have adopted. I fully accept that other Deputies would say another approach ought to have been adopted. The proposal we have adopted is in accordance with the protocol and with good industrial relations practice. In so far as the detail is concerned, I am happy that it is correct but I have not been, and will not be, involved in the nitty-gritty of it. On the broad picture, I think we are doing what we intended to do. I want to emphasise that every step taken in the Labour Relations Commission has been agreed at the Labour Relations Commission, except that the unions have asked us on two occasions to extend a deadline they had agreed to, and we agreed to extend the deadline twice in the interests of hearing their point of view.
I have no problem in defending the company's position in regard to that strategy. I think it is the right one for us to have adopted and if other Deputies think that another strategy should have been adopted that the unions did not agree to, they are free to put that forward, but it is not one that has been agreed. I want to emphasise this point. We have moved at every stage throughout this negotiation with the agreement of the trade unions as to the stages that we would go through.
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I had a question about forced redundancies and people having to reapply for jobs, and the kind of impression that exists in this regard.
Mr. John Horgan:
Again, proposals have been made. There have been no forced redundancies. We are working to do this by agreement. If there are voluntary redundancies, then that will have to be agreed with the trade unions. There are no forced redundancies on the table at this stage. We are working to do it by agreement.
Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Will workers have to reapply for their jobs or that kind of thing?
Mr. John Horgan:
There have been reorganisations in various areas where some jobs have been eliminated and we have been able to redeploy people in other areas. People have been told that their job is disappearing. For example, in financial shared services, we have had a huge investment in IT, which means that a lot of jobs are no longer necessary. The people there have been told this. Some have decided to leave the company, others have been re-employed in other jobs and some people have taken jobs at lower salaries - that is true. We cannot give a guarantee that once a person has a particular job, they will maintain it forever, nor can we say that if we have another job that warrants a lower rate of pay, we will give an employee the higher rate of pay just because he or she happens to have it. We cannot incur that kind of cost.
Everybody's job is being priced at the market rate for the job. It is true that in certain areas in Bord na Móna, salaries were above the market rate. We are moving as swiftly as we can, by agreement, towards a situation where everyone is paid the market rate for the job rather than above it. In some instances, of course, that means there are increases but in quite a number of instances in certain areas of the company, we are paying above the market rate and in the current environment, we cannot continue to do that.
John O'Mahony (Mayo, Fine Gael)
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I thank the witnesses for appearing before the committee. There was no agreement and there were strong opinions on both sides, but the matter got good ventilation. I thank the witnesses for the way they engaged. I also thank the members for their questions, which clarified the rationale for all the things that have happened. We look forward to a meeting of minds on all the matters we discussed today as the company goes forward.