Brown to green: Bord na Móna’s transformation into a climate solutions company

When Tom Donnellan joined Bord na Móna in 2018, the company was facing a very uncertain future.

The growing climate crisis meant the days were numbered for its core business of harvesting peat, which had become unsustainable on a number of fronts.

Planning permission for the peat-fired power stations in the midlands was coming to an end and the public service levy (PSO) that effectively supported Bord na Móna was also due to end.

On top of these major headwinds, the company was haemorrhaging money due to an unbalanced cost structure and the Irish Government had just introduced a carbon tax on all fossil fuels.

It was a perfect storm for a company that is almost as old as the Irish state.

“When I joined Bord na Móna, the company was at a crossroads. There was a real concern as to whether it could continue as an entity. Many felt that climate change was the death knell for the company and they couldn’t see a way forward,” says Donnellan.

“At the time, the strategy was to keep harvesting peat up until 2030. That was plan A. And plan B was to keep harvesting peat after 2030. There was no vision for the company outside of peat,” he adds.

A native of Co Clare, Donnellan joined Bord na Móna from the private sector having worked most recently for Alcatel Lucent, a France-based telecoms giant owned by Nokia.

However, before he could begin to think about a new strategic direction for Bord na Móna, Donnellan recognised that he had to get the company back to a financially sound position first.

At the time, Bord na Móna’s horticulture business and fuels business (peat briquettes) were losing money, while the company’s core business of selling peat to generate electricity was only profitable due to the PSO levy. Mostly, the company’s cost structures had grown to an unsustainable level.

Profits

In 2017, the year before Donnellan joined, Bord na Móna had made an operating loss of €6.1m, while pre-tax losses were close to €15m.

In a bid to turns things around, Bord na Móna underwent a major restructuring programme in 2018 and 2019 as it stripped out 40% of fixed costs from the business, an unusual step for a semi-state company.

The majority of these fixed costs were related to staff, as the company had become “top heavy” with too many management layers.

Over 400 employees left the company as part of a voluntary redundancy scheme, with half of these redundancies in some form of management role.

For an old institution like Bord na Móna this restructuring process came as something of a shock, particularly for local communities in the midlands.

Between 2018 and 2019, Bord na Móna incurred almost €80m in restructuring charges related to redundancies and the closure of certain operations.

Climate change was seen by many as a threat to Bord na Móna but it actually presents loads of opportunities

The business is now on a much sounder footing and Donnellan said he expects Bord na Móna to deliver a significant profit for 2020, which will be the first profit in four years.

Donnellan says Bord na Móna will also be debt-free this year for the first time in the company’s history, having slashed its net debt from over €170m just four years ago.

With the finances of Bord na Móna stabilised, Donnellan and his team set about creating a new strategic direction for the company.

“Climate change was seen by many as a threat to Bord na Móna but it actually presents loads of opportunities. We developed a new strategy for the company called “Brown to Green” and repositioned Bord na Móna as a climate solutions business,” says Donnellan.

Four new business units

As part of this new strategy, Bord na Móna will have four new business units dedicated to:

Renewable power

Transitioning into renewable power generation was slowly happening when Donnellan first arrived at Bord na Móna.

The company operated a number of wind farms around the country, was beginning to develop its biomass capacity to fuel its power station in Edenderry, Co Offaly, and also owned a 5.6MW biogas plant in Kildare.

However, the new strategy for Bord na Móna has seen a step change in its ambitions in this area.

“We’ve gone from building a new renewable project every four years to now building two projects every year. We’ve doubled the size of the team in our renewable power division to 200 and these are all really high-skilled jobs,” says Donnellan.

“The goal is to develop a really diverse portfolio of renewable energy assets over the next decade. These will be a mixture of wind, solar, battery and biogas assets,” he adds.

This year, Bord na Móna is in the process of constructing a 75MW wind farm at Cloncreen, Co Offaly, following an investment of €100m, while the second phase of its wind farm in Oweninny in Co Mayo is also nearing completion.

The Oweninny wind farm is a 50-50 joint venture between Bord na Móna and ESB.

The first phase of the farm was completed in 2019 and has capacity for 93MW of renewable power.

When the second phase is completed, the renewable energy capacity of the wind farm will increase to more than 170MW per annum.

A third phase is also planned for Oweninny, which would further increase its renewable energy capacity close to 270MW per annum.

The company also received planning permission last year to begin work on a 90MW wind farm at Derryadd in Co Longford, which will also be the first wind farm to include a battery storage facility on site.

Bord na Móna has also started the planning process for an 85MW wind farm between Birr and Cloghan in Co Offaly, while it is at the pre-planning stage for two new wind farms at Ferbane and Edenderry in Co Offaly and another planned for Ballivor in Co Meath.

Construction

Outside of wind, Donnellan says Bord na Móna is getting ready to begin construction of a new 807ha solar farm at Timahoe in Co Kildare, which would produce up to 70MW of renewable power.

The company is also planning a new large-scale biogas facility at Cúil na Móna bog in Co Laois, which would be able to produce renewable bio-methane from up to 80,000t of landfill waste.

Meanwhile, at its Edenderry power plant, Bord na Móna hopes to continue producing electricity at the facility after its current planning expires in 2023.

From 2023, the company will not be allowed to burn peat at the facility and is instead aiming to use 100% biomass to generate electricity at Edenderry.

This would eliminate the need for peat altogether and see 850,000t to 900,000t of biomass used every year as feedstock for the plant.

Bord na Móna has submitted its planning application to continue to operate the Edenderry power plant after 2023 solely on biomass but this is likely to face opposition from environmental groups.

Circular economy

When Donnellan and his senior management team stood back and looked at Bord na Móna, the other area where they saw significant growth opportunity was in its waste management business AES. At the time, many within the company saw AES as non-core to Bord na Móna and felt it should be sold.

Instead, Donnellan has doubled down in this area and sees Bord na Móna as being a major consolidator in the waste management industry over the coming years as the concept of the circular bio-economy gains momentum.

Today, the company operates a traditional waste collection service and two major recycling plants.

The first recycling plant is located in Drogheda and recycles used tyres into a product called crumb rubber, which is then used in astro turf pitches and other similar surfaces.

This business now recycles half of the 1.5m used car tyres in Ireland every year and has also developed schemes to help farmers dispose of old tyres that may have once been used to cover silage pits.

The second recycling business operated by Bord na Móna is based in Littleton in Co Tipperary at the site of an old peat briquette factory. This facility has the capacity to process 24,000t of plastic fill every year and is currently expanding to include recycling capability for bottled plastic.

Outside of recycling, AES operates the largest landfill site in Ireland at Drehid, Co Kildare, and another landfill at Cúil na Móna in Laois.

The company aims to transform its Drehid site into what’s known as a “sustainable landfill”, where all waste is stored in a lined cell structure that protects the natural environment while also capturing the naturally occurring gases from the waste to be used as renewable biogas.

Bord na Móna already has a biogas facility up and running at Drehid and it is now planning a second biogas plant at its Laois landfill.

This concept of producing renewable energy from waste is an important part of Bord na Móna’s strategy for its waste management division as it feeds into its broader strategy for a circular economy.

The entire waste management industry is changing rapidly thanks to technological advancements.

Up to now, Ireland has exported a significant portion of all its waste, with most of its plastic recyclables shipped overseas.

The EU is clamping down on member states exporting their waste, meaning significant investment will be required in the Irish waste management sector over the coming decade to build new waste processing or recycling facilities.

However, the waste management sector in Ireland remains highly fragmented today with a lot of family businesses operating throughout the country.

Given its scale, Donnellan feels Bord na Móna is perfectly placed to act as a consolidator in this sector as smaller, family-owned businesses are unlikely to be able to fund the required capital investments in new technology that will be needed to continue in the industry.

Peat

Nothing illustrates the unfolding transition at Bord na Móna like the changes that are happening on the 80,000ha of bogs it still owns today.

At its peak, Bord na Móna harvested up to 6.5m tonnes of peat every year.

The majority of this peat was used to fuel the power stations in the midlands but it was also used to create peat briquettes and provided an important raw material for the horticulture sector.

At the start of this year, Bord na Móna formally announced it had ceased all peat harvesting operations.

The value of Ireland’s peatlands is now clearly linked to their capacity to act as a vast carbon sink.

Over the coming years, Bord na Móna will invest €126m in an unprecedented bog rewetting programme across 33,000ha (82,000 acres) of land.

The company aims to trap 109m tonnes of C02 back into its peat soils after decades of draining and harvesting.

Donnellan believes this new division of Bord na Móna will be key to its success as it seeks to reposition itself as a climate solutions business.

Alongside this, Bord na Móna has said it will cease making peat briquettes in the coming years, which are hugely popular with Irish consumers.

However, the company says it has recently developed a new “green briquette” made from renewable biomass.

On the horticulture side, Donnellan says a number of its major retail customers in the UK and abroad have been seeking an alternative to traditional peat for growing plants for the past number of years.

And while peat is still the key input for the horticulture sector today, renewable forms of plant compost are coming on stream that will eventually displace traditional peat once stocks run out.

New business

The final division of the repurposed Bord na Móna will focus on new business developments and investments in innovation.

The company is opening a new “green innovation hub” at Lough Boora in Co Offaly, which will be backed by the EU’s Just Transition fund.

Donnellan says Bord na Móna has a long track record of innovation and hopes the new green hub will be a centre for incubating new business ideas and innovations linked to sustainability and climate solutions.

The green innovation hub is backed by Enterprise Ireland and will also include collaborations from Athlone IT, Maynooth University, Limerick IT, Kilcormac Development Association and Offaly County Council.

While he’s only been with the company for three years, Tom Donnellan has already achieved a lot at Bord na Móna.

With the company now in a healthy financial state, Donnellan is planning a €1.6bn programme of capital investments over the coming decade to drive the required change in Bord na Móna as part of its “Brown to Green” strategy.

Capital

Raising the required capital doesn’t look like it will be an issue for the company with Donnellan reporting really strong interest from financial markets eager to funnel money into green or sustainable business opportunities.

As part of this capital investment programme, Donnellan expects employment levels in Bord na Móna to increase back to about 2,000 people from its current level of 1,500, which would be an important boost to the midlands economy that has so depended on the company for many generations.

“The midlands of Ireland is part of the DNA of this company. There’s great loyalty to Bord na Móna from communities here and we have a responsibility to be more relevant than ever to those people. We want to be a provider of really high-value jobs that young people today are looking for,” he says.

Overall, Donnellan’s goal is to bring Bord na Móna full circle where it will be a fully fledged climate solutions business.

As of today, about 75% of the company’s turnover comes from renewable energy and sustainable products but Donnellan says this figure will have reached 100% by 2025.

Overall, Donnellan’s goal is to bring Bord na Móna full circle where it will be a fully fledged climate solutions business

It still has a road to travel but if Bord na Móna completes its transition to the climate solutions business as laid out in Donnellan’s “Brown to Green” strategy, it certainly can lay claim to being one of the most impressive business transformation stories in Irish history.