Mr. Bill Stanley:

I will do that first and I will then try to address, one by one, the large number of issues that have been raised by members. In terms of KPMG's role, we have asked that company to confirm that the calculation of payments is in accordance with the contracts and that it has been done correctly. We have also asked KPMG to advise us on the scope and content of the commercial statement that we are putting together for the partners. That is the role we have given KPMG and it is very much related to the calculations part of the contract. The scope of its involvement does not extend beyond that.

There is a very important element of context to all of this that I would like to mention but first, I would like to reiterate what Mr. Murphy said in terms of our belief that the vast majority of our partnerships are working well. That is the feedback we are getting through our local offices but we do acknowledge that there are a number or problematic partnerships. In terms of context, it is important to understand the phase that this portfolio is at and the phases that forestry typically goes through. In the first five years when one plants a greenfield site with new forest, there is a lot of activity and there is a key focus on ensuring that plantation is well established, that all the plants strike and that one gets to what is called "free growing". Typically, that takes the first four to five years. There is then a period of between ten and 15 years when there is very limited activity in the forest. It is really a case of maintenance at that stage, as the forest grows and as it comes to a point where thinning takes place. That is the point when the premiums are payable - the first 20 years of the crop - but the general level of activity is low. A key point to outline here is that our ability to forecast the actual profitability of that crop is relatively limited until we see the growth rates of the crop and until it gets closer to thinning stage. More than 80% of the 630 farm partnerships that we have are still at the stage where the activity is relatively low. That is a very important piece of context. There are a number which have now come through that stage and we have started to carry out thinning. I will talk through the whole process by which we calculate the payments and the annuity payments that are due to our partners in due course but would like to address a number of other issues first, as they arose.

The issue of exit for the partners was raised. Senator Mulherin asked how many partners have exited or been facilitated to exit. Exit is something that arises for us on an ongoing basis. Partners' circumstances change and these are long-term, typically 40-year agreements. The issue of probate has arisen and is a very real one, particularly in the context of such long-term contracts. We face requests to sell our share of the partnership and also to buy the partners' share of the partnership on a regular basis. We have a clear process by which we evaluate payments that have been made to date, payments that are due and assess those on the basis of our estimate of the profitability of the crop. In quite young crops it is quite difficult to make that assessment. A further complication can arise if crops have to be roaded. These are the types of costs that must be taken into account. To date we have successfully exited approximately ten partnerships by way of us buying out the partner buying or the partner buying us out.

The issue of shortened rotation has been mentioned. We have already referenced the fact that there are seven different schemes involved here and in six of those schemes, a shorter rotation is advantageous to the partner.

What that means is the partner gets the same level of payment from that plantation spread over a number of years but it is a shorter number of years. Therefore, the individual payments are higher, but the level of profit that accrues to the partner is the same in every case. The one exception to that is the scheme, to which Senator Mulherin referred, where there is a life payment and a guaranteed fixed annual salary, as it is called, in the contract that is payable to the partner. That payment is indexed linked. I would refer the Senator to the case studies we have shown, including one from that particular scheme, which demonstrate that during the course of that rotation Coillte makes a loss on that rotation.

On the issue of Coillte making harvesting decisions, in essence, when it might be advantageous to Coillte to harvest the crops or not to do so, there are three key tests to which we have to live up to in these contracts. We have a clear responsibility to ensure these crops are managed commercially in the interests of both parties. That is a contractual obligation. That is the first test we have. The second test is that it must be done on sound commercial principles, having regard for good silviculture and good forest management practice. The third test is that it must have regard for the long-term nature of forestry. Those are three tests by which we live. In accordance with that, we produce what is called a resources plan. It determines when crops get thinned, when they get clearfelled and what their date of clearfelling is. Bearing in mind that the vast majority of these partnerships have not yet got to the stage where they are being thinned, there is quite some road to travel before the clearfell date, which is the date Coillte sees its return on its investment in those partnerships. The resources plan essentially is drawn up on a case-by-case basis, partner-by-partner basis; it is not drawn up on a portfolio basis, or with reference to Coillte's outputs from its estate. The reason for that is that we have an obligation to maximise the commercial benefits and the interests of both partners in this agreement.

On Deputy Penrose's question regarding where the partnerships are located, I do not have to hand the figures per county. We divide the country up into six business area regions. The spread is relatively even. We have one area in the north west in which there are only 33 farm partnerships. The other five regions typically have an even number ranging from 16% up to 25% of the partnerships. It is correct to say there is a cluster in the Kilkenny-Waterford-Tipperary region and there is one in Galway. Typically speaking, there is a good spread across the country.