Tony Killeen (Clare, Fianna Fail)

I will do my best to speak as quickly as possible, a Leas-Cheann Comhairle, as many Members wish to speak. They will not be able to do so, however, because of the votes and other issues. For the Deputy's information, I do not have an amendment on Committee Stage.

The Bill before us amends section 24(1)(b) of the Forestry Act 1988 in which the existing borrowing limit of IR£80 million is stipulated. The existing statutory limit was set in 1988, when the legislation providing for the establishment of Coillte was enacted, and has not been increased since then. Coillte has a significant capital investment programme each year, which includes reforestation, investment in forest infrastructure, and plant and equipment. It is necessary to increase the statutory borrowing limit to make adequate provision for the borrowing requirements of Coillte for its capital expenditure programme. Section 2 provides for the Short Title, collective citation and construction of the Bill and is a standard provision.

Coillte Teoranta is the national forestry company, established as a private commercial company under the Forestry Act 1988. The Act provides that the principal objects of the company are as set out in that Act. I will skip over those in order to allow time for others to speak.

Coillte currently manages 445,000 hectares of forest land of which 79% is forested with the remaining 21% encompassing open spaces, water, roads or land above the tree line. Such management includes maintenance of the forest estate, felling as appropriate and replanting. The company supplies logs to the timber processing industry, including sawmills, panel board mills and the emerging energy supply businesses. While the company provides direct employment, it also engages harvesting and haulage contractors thereby sustaining employment for a far greater number.

The company also owns two panel board businesses: Smartply in Kilkenny, which is close to Waterford port; and Medite in Tipperary, both of which I visited recently. These manufacture OSB and MDF boards respectively with over 80% of their output being exported. There are significant investments currently in train in both plants.

Coillte has entered into a joint venture arrangement with the ESB to develop a wind farm in Garvagh Glebe, Co. Leitrim. It is also important not to overlook Coillte's contribution to recreation by way of its Forest Parks and trails and its involvement in Lough Key Forest Park in County Roscommon.

The company now has an extensive remit. Colleagues in the Joint Committee on Agriculture, Fisheries and Food met with representatives from Coillte at the end of October to discuss the company's annual report for 2008, at which Coillte informed the members of its current structure and its businesses. I will not go into those elements at this stage.

The purpose of this brief outline of Coillte's business interests is to put in context the proposed increase in the statutory borrowings level for the company - or, in reality, the group - as the limit on borrowings applies to the aggregate at any one time of borrowings by the company and its subsidiaries. The limit on the company's level of statutory borrowings is currently €101.5 million. The business environment in which Coillte, as a commercial company, operates is vastly different from the business environment in which it operated in its earlier years.

There is a provision in the Act whereby Coillte may seek approval for temporary borrowings. Coillte has sought and received approval under this provision on a number of occasions over the last number of years. However, it is considered sensible to increase the statutory borrowing limit formally, rather than have any concern about the interpretation of the term "temporary" in the context of borrowings.

While it was generally accepted in principle that the company's statutory borrowing limit should be increased, there has been much consideration as to the most appropriate level. Inflation alone would allow an increase in the borrowing limit from €101.5 million to €182.5 million. This is based on inflating the €101.5 million limit in 1988 by Ireland's inflation rate up to October 2009.

Coillte has a significant capital expenditure each year. In its annual report and accounts for 2008, Coillte states that its capital expenditure in 2008 was €58.1 million. It also explained that "a significant proportion of the expenditure was incurred in enhancing and maintaining the forest estate and expanding the road network within the forest". It added that the "expenditure also included a substantial investment in Medite Europe Limited that will increase production capacity and improve operational efficiency". The figure for capital expenditure in previous years was €58.4 million in 2007 and €49.4 million in 2006. This level of ongoing capital expenditure was a consideration.

Coillte has outlined its strategic plans to 2012 in its document, Destination 2012 to which it referred in its discussion with the joint committee. This document focuses on Coillte's four business areas and contains numerous proposals, including proposed investment in renewable energy, especially wind energy. The strategic plan requires in-depth consideration to which I will refer again.

With regard to determining the most appropriate level to which the limit should be increased, it was concluded that €400 million would allow Coillte sufficient headroom for core activities, working capital as well as approved investments.

With regard to the consideration of Coillte's strategic plan, the House is aware that under the new programme for Government, I am committed to reviewing State forestry policy to take account of its critical role with regard to climate change and its importance to construction, bio-energy, bio-diversity and its potential to deliver long-term employment in other downstream industries. The review will include the role of Coillte and its functions and operations. It will also assess the effectiveness of current forestry grant schemes and make recommendations on how best to deliver supports in the future.

Three working groups are being established to carry out the review, with each group assigned a specific aspect. The respective groups will review forestry grant and premium schemes; State forestry policy; and the role, functions and operations of Coillte. With regard to the review of the role, functions and operations of Coillte, the working group will also consider the Coillte strategy document, Destination 2012 to which I referred earlier. Pending the outcome of these reviews, my initial view is that Coillte, with its extensive experience in forestry management and knowledge of the timber market, has played a significant role in the development of Irish forestry and that it is timely to look at its role, functions and operations to optimise its contribution to forestry and the economy. I look forward to the output from the Coillte review group.

With regard to the proposal before us, to increase Coillte's statutory borrowing limit, it is important, in view of its current contribution to the economy by way of employment, both direct and indirect, and the export of its products, that Coillte be provided with the means to acquire adequate funding for investment in its businesses. There are also the numerous other benefits which we derive from Coillte's management of the forestry estate, such as carbon sequestration, biodiversity benefits and the provision of recreational facilities. I stress that an increase in the company's statutory borrowing limit does not automatically mean that the company may borrow to that limit. Under Section 24(1) of the Forestry Act 1988, the borrowings of the company require the consent of the Minister for Finance and the Minister for Agriculture, Fisheries and Food. When the company sends a request outlining its expected borrowing requirements, the request is closely examined by the Department and the Department of Finance and, if considered reasonable and soundly based, it will be submitted to the Ministers for consent. The level of borrowings is also reported to the Departments on a monthly basis. This requirement is in addition to the reporting requirements provided in the code of practice for the governance of State bodies.

Significant investment proposals also require the approval of both Ministers. With regard to reporting requirements, I draw particular attention to the requirement in the code of practice which states:

The chairperson of each State body must furnish to the relevant Minister in conjunction with the annual report and accounts of the body, a comprehensive report covering the group ... outlining all commercially significant developments affecting the body in the preceding year, including the establishment of subsidiaries or joint ventures and share acquisitions, and major issues likely to arise in the short to medium term.

I take this opportunity to welcome the revised and updated code of practice for the governance of State bodies published by the Minister of Finance earlier this year. The reporting requirements, which it stipulates, and ongoing communication between Departments and agencies under their remit are vital elements in the oversight of agencies.

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