Mr. Gerard Murphy:

I thank the committee for the invitation to address it and we welcome this opportunity to address some concerns and respond to some of the issues that have emerged in recent weeks. We have submitted two interim reports to the committee since our last appearance in December and we hope to further build on these today and outline a clear set of actions that will address any outstanding concerns to the satisfaction of all stakeholders. Before that, I will give a little background and context.

Coillte’s farm partnerships are highly innovative products that were launched initially in the 1990s. The agreements were all designed to promote afforestation at a time when this was recognised as a key priority for the sector. The agreements were also designed to provide solutions for farmers who were considering entering forestry for the first time by addressing matters such as maximising access to forestry grants for landowners, providing early cash payments and avoiding the requirements for farmers to sell land. A key principle of the partnerships is that the overall value of the forests is maximised for the benefit of both partners by providing the landowner with Coillte’s expertise and economies of scale, market access and crop certification.

Between 1993 and 2012, seven main schemes were developed and within these there are 35 identifiable forms of contract. Further to this most schemes would have undergone some degree of customisation and negotiation to suit individual needs. The consequence of this is that it is difficult to make direct comparisons between partnerships and each partnership should be evaluated on a case-by-case basis.Let me be clear that every one of our partnership contracts is legally sound. Our records show that all our farm partners had access to their own independent legal advice at the time of contract formation and signing and many of them were subject to detailed and extensive engagement with the partner's solicitor.

In a number of recent reports, allegations have been made or information has been inaccurately represented regarding Coillte’s farm partnerships that we would like to specifically address for the committee. It has been suggested that Coillte has not paid partners what they have been due and has in some cases harvested timber which is not accounted for in profit calculations. Coillte can confirm that having reviewed its contracts with farm partners, it is satisfied that there are no cases where partners have not been paid what they are due and it is satisfied that it is fulfilling all of its contractual obligations. All timber that is harvested has been and will be included in profit calculations that determine payments to the partners. It has also been suggested that some farm partners will only receive 1% of profits from the partnership. We refer to the case studies in the presentation, which clearly outline that there is a good balance of payments between the partners. The precise profit share at clearfell is based on the scale and level of early payments that have been made. For example, partners who received larger earlier payments will receive a smaller proportion of the clearfell profits and vice versa. In most cases the partner will receive approximately 60% of overall cash generated from the crop. In some cases, and particularly the index-linked schemes, Coillte is forecast to make a loss on its share of the partnership.

It has also been reported that forests have been poorly maintained. Coillte has a very strong motivation to manage these forests to a very high standard in order to protect its investment to date. Coillte ensures that its forests are managed in a consistent and professional manner to the highest standards. All Coillte forests, including those involving farm partnerships, are independently audited and certified as being well managed to both Forest Stewardship Council and Programme for the Endorsement of Forest Certification standard. This certification adds significantly to the overall value of the timber produced from Coillte’s farm partnerships. A number of Coillte’s farm partnerships, including those which have recently received media coverage, have won Royal Dublin Society forestry awards for the sustainable management of the forests.

It also has been reported that Coillte has not communicated with its partners, in some cases for 20 years. Let me state clearly for the committee today that this is simply not true. Given the length of partnership of over 40 years and changes in circumstances, we recognise the need to strengthen communication processes, particularly around more formal systems of communication and transparency on payments and how profits are calculated. We are taking active steps to address this. The level of communication is very much related to the activity phase of the crop. Our records indicate that while our formal communications need improvement, there has usually been regular operational communication with local foresters. Our records of correspondence, meetings and site visits clearly demonstrate that it is simply not true to say that there has been no communication for 20 years.

It has also been reported that Coillte deducts a 15% marketing cost. This is incorrect. The contracts specify exactly how the marketing cost is calculated. The precise percentage is calculated every year based on historical costs in Coillte’s annual accounts related specifically to the cost of sale. The marketing charge is based on direct costs of marking and measurement and is approximately 2%, not 15% as has been reported. The actual charge is consistently in the order of 2%, which is well below the industry standard.