Tags: CEO, Coilte, Cork, Ireland, politics, salary, Séan Sherlock

Sean Sherlock

IN discussing the Second Stage of the Forestry (Amendment) Bill  find ourselves in a scenario whereby the government seeks the permission of this House to afford to Coillte the opportunity to increase their statutory borrowing requirement from 101.5 million approx to 400million

The Bill’s explanatory amendment states, and I quote:

“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 — this 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. is State owned and is a State body.”

In dealing with this Bill, there are points which I would wish to see clarified

We are told that the existing statutory limit was set in 1988 when the legislation allowing for the creation of Coillte was enacted and it has not been increased since then.

Under the Forestry Act, 1988, Coilte may, with the consent of the Minister for Agriculture and Food and the Minister for Finance, borrow money for capital purposes including working capital from persons other than the Minister for Finance. The aggregate at any one time of such borrowings by the company shall not exceed IR£80m (-€101.5million approx.)

Over the past number of years Coillte has been availing of the temporary borrowing provision as per the provisions of the Forestry Act 1988.

But, Coillte’s level of borrowings at the end of 2008 was €161.2million.

We are told that the company currently has approval to borrow up to a total of €260million under Sections 24(1) and (2) of the Forestry Act 1988.

A briefing note provided to the Whips office tells us capital expenditure by the company has included:

• The acquisition of Weyerhaeuser Europe Ltd (renamed Medite Europe Ltd) in November 2006

• Coillte’s annual capital investment programme. In 2008 over €58.09 million was spent on afforestation, reforestation, buildings, machinery/equipment and other capital work.

• Between 1993 and 1999, Coillte invested significant funds in acquiring and planting 24,000 hectares of land.

• Investment in Information Technology.

While Coillte may, as provided in Section 24 (2) of the Forestry Act 1988, borrow money temporarily up to a limit approved by the Minister with the consent of the Minister for Finance, it is considered that it would be better to increase the statutory borrowing limit provided in Section 24 (1).

Temporary borrowings have been approved for Coillte, under Section 24 (2) – however, it is not ideal to provide large amounts of finance on a long-term basis by way of a succession of temporary borrowing sanctions.

The proposal before the House is to decide that “it should pass this legislation on the basis that the taking of the proposed legislation before the end of the year would mean that Coillte’s proposed borrowings could be considered in the context of Section 24 (1), rather than the company seeking approval for additional borrowings, over and above a limit set in 1988, under Section 24 (2).

“The current practice is that, at the beginning of each year, Coillte seeks the consent of both Ministers, under Section 24 (1) of the Act for borrowings up to a certain limit for the (calendar) year i.e. from 1 January to 31 December.

While, we support this in principle, we do have legitimate questions about how Coillte operates.

There are questions around its Corporate Governance structures and its day to day practices.

We know that the Organisational Structure has been significantly changed:

In 2006, the Coillte Group was re-organised around three key operating divisions –

- Coillte Forests

- Coillte Enterprise and

- Coillte Panel Products.

Coillte’s estate amounts to approx. 445,000 hectares.

The Coillte Group consists of Coillte and the following subsidiaries and joint venture undertakings:

- Smartply Europe -  a manufacturing facility in Waterford where it manufactures Orientated Strand Board (OSB) wood panels for the Irish, European and USA markets.

- Medite Europe – a manufacturing facility in Clonmel, Co Tipperary where it manufactures medium density fibreboard (mdf). This was formerly known as Weyerhaeuser Europe Ltd and was acquired by Coillte in 2006.

- Coillte Panel Products UK Ltd operates its panel products marketing business in the UK.

- Moylurg Rockingham – a joint venture arrangement with Roscommon County Council in relation to the development and operation of Lough Key Forest Park.

- Garvagh Glebe Windpower Limited – a joint venture windfarm development with ESB.

My questions surround the logic of paying a CEO a salary of 400,000 plus at a time when the commercial interests within the entity that is Coillte are underperforming.

Management at Coillte must acknowledge that the group is State owned and is a State body.

It must acknowledge that if every worker in this country has had a pay freeze or reduction in their pay, then Coillte and its staff must not be exempted from a similar cut.

Furthermore, there are questions surrounding some of the practices  at Coillte.

I refer to a report by the  Forestry Stewardship Council’s Principles in 2006, whereupon it has been reported that Coillte have been before the courts for breaches in Irish Law.

For a body with a considerable amount of Irish land in its charge, Coillte’s rap sheet on illegal dumping and felling is not assuring.

The administration’s laissez-faire attitude to the European Court’s rulings on its status as a State body is disconcerting.

Perhaps symptomatic of this, Coillte’s record on access to lands and due diligence in giving public notices on manners such a felling of trees is less than desirable.

While the Labour Party is not opposed to this Bill, we feel that the State’s position as the sole shareholder in Coillte must be reflected in both the management’s relationship with the Oireachteas and in its dealings with the public.

As a State body it is essential that Coillte is run in a responsible and transparent manner, with due deference to the State and and its responsibilities to the Irish public.

Before we, as elected representatives, can in confidence pass this Bill, questions have to be asked.

What is the real requirement of Coillte to borrow €400million? Is €100million insufficient?

Coillte must satisfy conditions that I am certain I am not alone in seeking.

Borrowings of this magnitude, in this climate, must go directly towards significant capital investment which will ensure a positive return.

This return must not only cover the significant loans taken, as facilitated by the passing of this bill, but must also ensure a return for Coillte.

The return on these loans will presumably cover a dividend for the State in the medium to long-term.

Having consulted Coillte’s recent financial reports, its current pension deficit stands out as a concern that must be addressed.

Can we be assured that the borrowing levels that Coillte seek are not simply for addressing this deficit?

What are the plans to address the pension deficit?

Bearing in mind the current events in Copenhagen, Coillte must not only seek to improve its own environmental record, but strive to set new standards.

Coillte, as custodians of a significant amount of Irish land, must seek to harness the potential that lies therein.

Reports from Copenhagen suggest that if a deal is struck, agriculture will have to cut greenhouse gas emissions by at least 20pc.

The politics of Copenhagen are such that agriculture and food will be treated differently.

I do not buy into a theory that the way to cut CO2 emmissions is to cut food production.

We cannot and must not cut the national herd and I hope that Mr. Gormleys mandate is clearly set out in that regard.

Growth in the Forestry sector must then become the political mechanism by which we offset carbon generated.

This will provide a significant role for Coillte as an offsetting mechanism so that agricultural production is not compromised.

If the increase in the borrowing requirement feeds into this agenda then that is to the good.

Coillte has a critical role in relation to Climate Change.

Coillte will have a role in relation to alternative energy production.

With the advent of better technologies we must be satisfied that the Commercial State sector do their utmost to address this global challenge whereby we grow our economy, create employment and reach (and perhaps surpass) international targets on carbon emissions.

The Labour Party will support this Bill without amendment.

But it is necessary that this House would ensure that Coillte will come under closer scrutiny in relation to its practices.