Selling Coillte makes no sense, says report
Published 29/01/2013 | 05:00
Selling the State's commercial forestry service, Coillte, makes no financial sense and amounts to a "liquidation" of the profitable asset, economist Peter Bacon has claimed.
Coillte is one of the semi-state companies slated for sale under the New Era privatisation programme.
For Coillte, privatisation plans are expected to involve selling the rights to cut down forests, but not the land the trees are planted on.
The independent report into the planned sale prepared by Mr Bacon is based on a possible privatisation scenario that would involve rights to three quarters of Coillte production being sold for an 80-year term.
A sale would "effectively liquidate Coillte as a viable, commercial entity", according to the report, which was commissioned by Impact, the trade union that represents many Coillte workers.
A price of €1.3bn would be needed to make up for the loss of 80 years of profits, said Mr Bacon. Coillte would need to sell at €78 per square metre, which is "well above current or recent prices", to cover all of the liabilities associated with the company.
That is because privatisation would mean the loss to the State of future Coillte profits, the loss of the amenity value of state-owned forestry, and the company's debts of €172m having to be repaid, the report found.
In addition, an employee pension deficit of €130m will most likely also have to be met by the Exchequer if Coillte is sold, it said.
A sale would raise cash up front, but would end up costing taxpayers over the long term, Mr Bacon told the Irish Independent.
"It's not a question of saying don't sell, it's a question of asking what price you would have to achieve to get the same return you're currently getting," he said.
Under new owners, timber that is currently processed in Ireland could be exported for finishing abroad, resulting in job losses, the report said.
New Era aims to raise €3bn that will go towards paying off some of the national debt and a job creation scheme.
According to Mr Bacon, a sale of Coillte would raise enough cash to repay three weeks of interest on the national debt if half the proceeds went towards servicing the debt.
The half share earmarked for infrastructure projects could generate a 6.5pc return, but it would be less than the return on holding on to Coillte, he said.