CONCERN has been raised about levels of debt at the state forestry company Coillte after its borrowings jumped 60% this year to €1/4 billion.
Legislation has been introduced to quadruple the amount of long-term debt Coillte can take on. This will allow it seek €400 million in this type loan.
Up to now the commercially-run state-company has been prevented from borrowing more than €101m on a long-term basis.
However, as the effects of the construction crash hit, it has turned to temporary borrowing to balance its books, but this must be approved by the Government.
The Department of Agriculture has confirmed Minister Brendan Smith and Finance Minister Brian Lenihan authorised Coillte to have short-term loans worth €158.5m, a increase from €61.5m at the end of 2008.
In its annual report for 2008 Coillte said the downturn in the construction industry had made its life more difficult because of reduced demand for timber and the affect of the cheaper sterling on the economy.
During the same period its profits fell from €40m to €9.5m.
A statement from Coillte said it needed additional cash to fulfil its investment programme and the borrowing limit was outdated.
“The original limit was put in place in 1989 when the company was formed. Coillte has grown significantly since then and the increased limit will allow us continue to deliver on our corporate strategy in forestry, panel products, land management and energy over the next five to 10 years,” it said.
However, the Labour Party’s agriculture spokesman Sean Sherlock said it was inappropriate for the minister to introduce the new legislation while Coillte, as an organisation, is spared the scrutiny of the Oireachtas.
Mr Sherlock said: “I would have serious reservations about voting in the increased borrowing facility until such time as there was complete transparency in relation to their corporate governance procedure.
“The Labour Party would need assurances that moneys borrowed would yield a return before voting for the forestry assurance,” he said.
The department said it had sanctioned extra borrowing this year but that the minister considered it a better policy to switch the debt from temporary deals to longer term ones.
“Coillte has a significant capital investment programme each year – this includes reforestation, investment in forest infrastructure and plant and equipment. It is necessary to increase the statutory borrowing limit to make adequate provision for the borrowing requirements of Coillte for its capital expenditure programme,” he said.
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