Coillte to provide continuation of annual income over the life of a forest

Forest owners who actively manage their forests prepare for the day when the annual State premium payments cease, as the forest enters the productive stage. By then, they will have prepared their forests for thinning so that an income stream is generated until the final payday when the forest is clearfelled.

However, for many forest owners, the absence of the annual State cheque in the post presents cashflow problems, as future income will be dictated by thinning cycles – usually every four to five years – while forests vulnerable to windblow may not be thinned at all, so the owner is forced to rely on a single payday at final harvest.

Now, a new annual cheque may be in the post, this time from the commercial arm of the State, as Coillte has identified forest owners who are likely to be attracted by a continuation of annual payments over the life of their forests. The company has launched Coillte Premium Partners (CPP), an initiative which will provide an annual income for up to 20 years after the Department’s premium payments cease.

“CPP provides a new option for owners of private forests to earn an annual, risk-free income from their forests without the need to sell their land,” according to Bill Stanley, the company’s director of strategy and new business, and one of the architects of the scheme. “CPP is aimed at owners of high-quality, commercial forests where the Forest Service payments have expired or are due to expire,” he said.

“Through the partnership, Coillte will manage all aspects of the private forest, including the harvesting and sale of the timber, while the landowner retains ownership of the land. Forest owners will receive an annual payment for their crops, while Coillte will own the harvesting rights. In addition, the landowner will receive a lump sum payment when the crop has been clearfelled.”

The company is confining the scheme to high-yield class (YC) Sitka spruce crops. Crops need to achieve a minimum YC20 (m3/ha/annum), although high-yielding Norway spruce is also likely to be considered. However, broadleaves and diverse conifers are excluded from the scheme.

Annual income

CPP provides the forest owner with an annual income of €510/ha for the full rotation of the crop, which “is based on a partnership of up to 20 years, or the date of clearfell,” said Bill. “Coillte will acquire the timber crop and strategically manage it seamlessly as part of its own estate, including all harvesting roading – subject to Forest Service grants – and replanting after clearfell,” he maintained.

The €510/ha annual payment is 25% higher than annual State premiums and lasts for the duration of the crop rotation up to 40 years, depending on crop productivity(Table 1). Importantly, if Coillte decides to clearfell before the agreed rotation length, the forest owner will receive the balance of annual payments due.

Annual payments are made after the State premium expires. For example in case study three (Table 1), there are 18 years remaining before clearfell. However, as the crop is only 18 years old, the owner qualifies for two State premium payments after which the €510/ha CPP payments will be activated. While the income period is shorter than lower YC sites in case studies one and two, the owner receives a higher lump sum at maturity.

The big payday in the life of a forest is at final harvest. Under this scheme, Coillte will provide a lump sum at clearfell based on crop productivity. The sum available and time schedule are case-specific and are agreed between the company and the customer at the outset.

Case studies

Who are likely to be attracted to CPP? Forest owners who are not in a position to actively manage their crops and who seek the continuation of an annual guaranteed income after State premiums cease, will undoubtedly see benefits in this initiative.

It is less attractive to forest owners who are part of producer groups or who actively manage their forests with advice from forestry consultants, as they will generate greater revenue over the life of the crop, especially at clearfell.

For example, the maximum revenue from a YC26 forest is €15,910/ha under the CPP, while a clearfell alone of such a crop would yield in excess of €20,000/ha in addition to thinning revenue.

However, the owner must wait until the crop is between 30 and 40 years old before this payday. In addition, he or she will need to set aside an estimated €3,000/ha to reforest the site. Coillte will replant the site as part of the contract and hand it back to the owner fully stocked at the end of the four-year establishment stage.

Also, costs such as application for roading grants and felling licences, road construction, harvesting and sales are all carried by Coillte. The additional future expense of forest certification, which private forest owners are now facing, will be covered under Coillte’s sustainable forest management programme.

Forest owners with diverse species – conifers and broadleaves – will be disappointed that the CPP is confined almost exclusively to Sitka spruce crops. Productive conifers such as Scots pine, larch and Douglas fir do not qualify, while all broadleaves are ruled out.

The management of broadleaves will be the responsibility of the owner, although in some instances where there are State-funded broadleaf woodland improvement schemes available, Coillte would carry out this work providing grant aid can be secured.

“Under certain circumstances, and providing it is in line with certification requirements, the landowner will have the right to extract value from the non-commercial portion of the crop during the term of the partnership,” said Bill.

“This will include accessing woodland improvement grants, but if significant interventions, such as thinning, are required on these non-commercial areas, these will be subject to a separate agreement between the partners.”

Wood mobilisation

The initiative has received the approval of Minister for Agriculture, Food and the Marine Michael Creed. He maintained that it “supports Irish forest owners and creates new value in the rural economy through the mobilisation of timber from privately owned forests” during the launch last Monday in Macroom.

In addition to revenue generation, CPP provides Coillte with additional log supply to its own harvest production which has plateaued.

It should, over time, provide the company with greater leverage over the increasing private log supply not only for its own panel board mills, but also its sawmill customers.

However, Coillte CEO Fergal Leamy maintained that the benefits of CPP extend beyond the company. “This initiative is aligned with our strategic objective to drive and co-ordinate the mobilisation of forestry supply in Ireland, ensuring that the projected doubling of the forestry industry in Ireland is achieved along with the associated economic benefits this will bring to rural communities,” he claimed.

The scheme sets out a clear marker on what constitutes commercial and non-commercial forestry with implications for future private afforestation in Ireland. Private forest owners, mainly farmers, who are being asked by the Forest Service to afforest their land with diverse conifers and at least 30% broadleaves, may have to come up with convincing answers and more imaginative grant aid afforestation programmes and premium payments that compensate them for this.

The CPP is likely to face tough competition from domestic and international investors including Dasos, the pan-European investment fund which has entered the private forestry marketplace. These are likely to base their investment portfolios on land and forest purchase. The Coillte scheme has a major attraction over these as it allows farmers with forests to retain ownership of their land.

Andrew Doyle TD, Minister for State with responsibility for forestry at the Department of Agriculture, Food and the Marine, launched the new Society of Irish Foresters continuous professional development programme (CPD) in the Wicklow Mountains national park HQ office, Trooperstown, Laragh, Co Wicklow, last Friday.

“The advantages to professional foresters of engaging in such a comprehensive CPD programme are numerous and they include the maintenance of professional competence, enhancement of existing knowledge and skills and the opportunity to develop new ones,” said Minister Doyle.

“I congratulate the society in creating a structure of accreditation for training and information events, which will help to identify emerging issues in terms of knowledge and skills that need to be addressed.”

The establishment of this CPD structure will upgrade the SIF’s current CPD system and is included in the Knowledge Transfer and information action measure of the Forestry Programme 2014-2020.

Fergus Ewing, MSP for Inverness and Nairn and cabinet secretary for the rural economy and connectivity, Scotland, met with Pat and Mike Glennon, joint managing directors of Glennon Bros, recently.

Secretary Ewing wished to inspect the ongoing construction of the £14m Glennon Bros investment in a combined heat and power (CHP) biomass facility. The visit was aimed to highlight the importance of the sawmilling sector to the Scottish economy and afforded Ewing the opportunity to engage with Glennon Bros on timber processing matters including Brexit.

“I welcome Glennon Brothers’ substantial investment into their site at Troon, which will support jobs and boost the local economy,” he said.

“Their integrated approach is great for the economy and for the environment, in particular when linked to the use of ships to move timber and reduce lorry miles. I am committed to working with the forest industries to reduce the impacts of timber transport and have recently increased funding to support this with an extra £5m.”

April forest checklist

Care should be taken to prevent fires, especially during the period coming up to Easter. Due to current extended high pressure dominated weather, a high fire risk (condition orange) is deemed to exist in all areas, especially where dry and withered vegetation is present in close proximity to forests.

The projected meteorological risk is likely to be further compounded by additional human factors arising over the Easter bank holiday weekend. The highest degree of vigilance is required by forest owners, managers and the public during this period. It is important to check firebreaks and update the fire plan, which should be part of the overall plantation management plan.

The planting season is in its final few weeks before recommencing in autumn. Plants need to be protected against cold dry winds and roots shouldn’t be left exposed even for short periods. Check plants regularly after they have been delivered to the site.

Plants in co-extruded bags should be stored in a cool place away from direct sunlight. It is also recommended to periodically check bagged plants which can overheat if tightly packed. Plants delivered at this stage are likely to have been cold stored (at around +5°C) in the nursery, which allows them to retain their dormancy.

The ability to cold store plants greatly helps foresters, forestry companies and contractors to better plan their work as they extend the planting season into late May, weather depending.