With €225 million revenues last year and a land bank of 80,000 hectares, Bord na Móna is an important State asset but a new strategy could see it move into the private sector, writes Arthur Beesley
Bord na Móna was not among the State companies specifically asked by the Government during its last term to examine its strategy and appropriate ownership structure.
But informed figures have confirmed that the company has adopted a new strategic plan, one that could see it move into the private sector sooner than larger groups such as the ESB or Bord Gáis. For differing reasons, neither of these is expected to come on the market soon.
Bord na Móna's strategic intent comprises a move away from State ownership into the private sector. Such an outcome would mark a significant turnaround for the peat company, whose commercial debt of €137 million was paid off by the Government in 1998.
Any decision, however, would be for the Government to make although Bord na Móna has stated in the past that the thrust of recent developments favours regulation over ownership.
Though the company has not yet published its latest annual report, it is believed to have earned operating profits in the region of €26 million last year on revenues of €225 million. There are some 1,800 full-time staff and about 600 seasonal workers. Profitable as the company is, it has no formal Government mandate at present to assess its ownership going forward. This is believed to be next on the company's agenda.
The signs are clear, however. It has signalled on a number of occasions in the last two years that ownership would come on the agenda sooner or later. The new strategic plan suggests that time is approaching.
The plan is believed to embrace the continuation of the milled peat operation, which will fuel two new power stations in the midlands in Shannonbridge, Co Offaly, and Lanesboro, Co Longford.
These stations are expected to have a life-span of up to 20 years. But any reduction, for environmental reasons perhaps, would cut demand for Bord na Móna's core product.
Accordingly, the company is believed to favour diversification, with its traditional activity complementing a greater concentration on wind power, environmental services and horticulture. It is also thought that the company wants to develop a waste business, with landfill dumps an option, and a waste-to-energy programme, to recycle rubbish. To no small extent, the company has embarked already on such a diversificiation. It is no longer merely a producer of peat briquettes.
For example, it developed the first wind farm in the State at Bellacorrick, Co Mayo, which has 21 turbines. Last November it disclosed plans to build an additional 210 turbines with the ESB, at a cost to the two companies of €300 million. If that 320 megawatt (MW) project clears the planning process, it will be one of the world's largest.
In the environmental services area, it produces effluent and air emission treatment systems and has a consultancy division. This division has activities in Britain, the US and in the domestic market. Profits in those markets suggests potential elsewhere.
The company's horticulture business, long a loss-maker, makes products for home gardeners and professional horticulturalists. It has been in profit since 1999.
More embryonic would be the development of a hydrogen-based, fuel-cell business, which is also believed to be under discussion. Such activities would be likely to be confined to research and development in the medium-term.
There are other factors which weigh in favour of diversification. Bord na Móna is the largest vendor of coal in the State and has an oil distribution business, but environmental concerns could prompt the adoption of new constraints on coal use.
But diversification costs money. Bord na Móna has a net asset value of about €130 million, but that figure does not fully reflect the value of its former headquarters on Baggot Street in central Dublin and 17 acres of industrial property in Newbridge, Co Kildare.
While the sale of such property could realise significant sums for the company, a transfer of ownership is favoured as a long-term funding mechanism. Government investment in State companies is not in vogue, hence the turn to venture capitalists and institutional investors. This occurs also because Bord na Móra is in many ways a unique company with few comparable peers in global business.
It is projected that such groups would have little interest in acquiring the 70,000 hectares of land that Bord na Móna regards as non-strategic. One suggestion is that this would be transferred to the State, leaving 10,000 hectares in Bord na Móna's books. It is not clear whether the Government would view this with any degree of enthusiasm, as it would present a management problem in in its own right to the State. The company is also believed to favour participation by management in any new ownership structure. This potentially sensitive departure would be in addition to an employee share ownership plan, which is likely to see 5 per cent of Bord na Móna transferred to staff soon. Whether the Government sanctions the plan remains to be seen.
In the first instance, it must give the mandate to address ownership. Needless to say, the State have been down this road many times before - with varying results.
Eircom proved a disastrous investment for hundreds of thousands of ordinary punters and finished up in private hands after an unhappy stint on the stock exchange.
But despite that, the sell-off of non-core assets continued. In its last term of office, for example, the Government also divested three banks. ACC Bank was sold the to Dutch group Rabobank, Irish Life & Permanent acquired the TSB, and Bank of Scotland (Ireland) bought ICC Bank.