Sunday 18 August 2019

Wood wind - How Coillte's boss plans to conduct agency's renewables rebirth

The chief of the State-owned organisation has wielded the axe and cut 200 posts since taking control in 2015, now he's out to confound Brexit fears and boost Government coffers by up to €40m

Coillte chief Fergal Leamy says there is plenty more to be done to transform the agency despite recent progress
Coillte chief Fergal Leamy says there is plenty more to be done to transform the agency despite recent progress

Colm Kelpie

When Fergal Leamy (40) told the staff at Coillte's head office that he was looking to reduce numbers there to 17 from 90, it, unsurprisingly, didn't go down very well.

He had the backing of the board and the Government for his "ambitious strategy" - making the state forestry agency leaner, increasing its operating cash and putting it in the healthy position of being able to spew out a bigger shareholder dividend each year.

With plans to cut the cost base by €20m, it was time to get staff on board as well.

"Was it difficult? Of course it was," he says. "The day I announced to people that we were going to 17 people as a head office, you can imagine the sheer shock."

Not exactly the best route to make you Mr Popular among your new staff following his appointment as CEO in 2015.

His first year in the job, he says, was spent driving around Coillte's various operations across the country to set out his vision.

"There was quite a bit of emotion, because people were concerned with all of the uncertainty. We had town halls up and down the country and I would stand up in front of 60 or 70 people, and I genuinely wanted people to say what they thought. The change was uncomfortable," he says.

All in all, Coillte's staff numbers have been cut by 200 through voluntary redundancy.

But Leamy is able to reassure the remaining staff that the heavy lifting has now all been done.

"I'd say the organisation today has been through a huge trauma, but has come out the other side and is in a good place. We have done our heavy lifting on the restructuring.

"We had four phases. We completed the fourth phase, it went to union ballot in June, and the new organisation went live on the first week in September. That's done."

He has good reason for optimism.

Last year's annual results for the agency - which is the custodian of 7pc of Ireland's land extending to more than 440,000 hectares - showed that operating cash flow surged 130pc to just over €15m. This year it's on target to hit €30m operating cash.

It had set a target of €12m for last year. It also reported record earnings of €98.3m for the year, up 10pc, while operating profit was just under €65m.

But to quote the old Fianna Fáil election slogan of 2002 - 'A lot done, more to do'.

"We're not finished. We've got quite a bit more to go," he says. "But we're rightly primed, we're where we want to be, and we're primed to see the benefits come through. How you measure that now is through the dividend."

And that's the part of his plan that looks set to make him a real golden boy in the Department of Finance. Mr Leamy believes Coillte could be paying a dividend to the State of around €30m to €40m within three to four years. That would be a significant increase on the €6.2m paid for 2016, which was up 24pc on the previous year.

"We very much hope that by 2020/2021, that's where we'll be," Mr Leamy says.

Although he's tight-lipped on the projected figure for this year, he expects it will be double digits.

Mr Leamy said the company had agreed a dividend policy with the State - linked to the increasing operating cash pile - and that it had committed to trying to grow that dividend each year.

The aim - to avoid the situation where the forestry agency can't see the wood from the trees if it suffers a bad year.

"What we want is to move away from is a business that in a year of bad timber prices, historically you wouldn't have paid a dividend for years. But under this new model, because you have a enough headspace, it means you still pay a decent dividend.

"It might be a little lower than you'd want it, but in the good years you pay a little bit more. It's within a range."

And so to the future.

"If we get this right, and we continue in the journey we're on, you'll have an organisation that is the best forestry land solutions company in Europe," Leamy says.

"It has that potential. We have some very strong assets in this country."

One future income stream is renewable energy. Coillte has just appointed financial advisers IBI and Capricorn to help the agency seek out a joint venture partner to help it manage its renewable energy ambitions.

Between now and the end of the year, their task will be to work with Coillte and figure out what is the right plan for that side of the business.

The commercial semi-State has identified around 1,000 megawatts of development for wind and renewable energy projects on its land. But it believes that to press ahead on its own would take considerable equity and "unbalance" the business.

"My primary aim and the aim of our board is to have a situation where we're not giving away the family jewels," Leamy said. "We're retaining the upside on the wind side but we're not taking the risk. That is the objective, and I think we're in a position with the sites we have that we can achieve that.

"We could have taken the decision to do this ourselves, but it would have been such a distraction. You would have had to think about the two parts of the business separately."

Longer term, the agency doesn't see itself as a utility company, Leamy says, but more a developer of wind assets - a view that is shared by the board, he adds.

"To do otherwise you would lose focus on forestry and it may well be something for a shareholder in a future point to look at.

"But from Coillte's perspective, it probably would be the wrong thing for us to do because we would get distracted by it."

For Leamy, the focus is to put Coillte on a sound financial footing - of particular importance given the threat from Brexit.

He is upbeat about the agency's prospects for dealing with the UK's EU withdrawal.

But he accepts there nonetheless remain considerable challenges for which the company needs to prepare.

"There are 40,000 trucks that move between Ireland and mainland UK every year with timber products on them," he says.

"That's 150 to 200 trucks a day. That's not including what goes north and south. The sheer volume here is extraordinary.

"So it's making sure of simple things - like our IT systems can process documents that might need to cross the Border. We're doing a lot of that prep work at the minute."

I wrongly suggest that delays for timber products at borders may not be quite as problematic as those for food products.

But Mr Leamy says time is paramount as customers in the UK regard Coillte almost as a British company.

"For us to support that, the slickness of the system is extraordinary. Material leaves our factories in Waterford and Clonmel and all of our customer factories across the country and is sometimes on-site 48 hours later - 24 hours later when it needs to be.

"We are looking at things like warehousing in the UK. It's a different challenge to food because of their perishability. But if a B&Q in the UK begins to see us as non-homegrown and they favour the homegrown, then that is a challenge. We're actually investing more in making us as much a UK-based company in that segment as possible."

And what of his own plans?

The Waterford man and father of three has had an eclectic background that has included a stint as a ministerial adviser under Simon Coveney, some time in private equity at Terra Firma Capital Partners and three years in Australia as CEO of agrifood business Consolidated Pastoral after spending four years in the US as head of Greencore US.

"I've spent 15 years travelling and I'm thoroughly enjoying my time in Coillte. It's always for me about coming in and leading that transformation, and we're not done yet."

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