Annual Report 2013

Managing Director’s Review

chairman picture

The 2013 financial year was a challenging year for Bord na Móna. This was primarily driven by the very low peat harvest caused by the record rainfall experienced last summer, which was unprecedented in the Group’s history. This brought particular challenges for the Feedstock, Powergen and Retail business units, which are dependent on the peat resource. Furthermore, our Resource Recovery and Environmental businesses (trading respectively as AES and Anua) continue to be affected by the macro economic environment. Resource Recovery has had to contend with significant reductions in waste levels generated as well as a lack of clarity in market structure, while the markets for the products and services offered by Anua remained sluggish.

In response to these challenges we successfully implemented a group-wide mitigation plan. Under the circumstances, this plan produced a satisfactory outcome for the year with an EBITDA of €61.3 million. We face a significant challenge over the next couple of years to replenish the peat stocks to satisfactory levels. Weather permitting, we intend to make progress in that regard during the harvest season in the 2014 financial year. We continue to review our cost base across all areas of operation to provide the most flexible model to address these ongoing challenges.

Bord na Móna continued to progress a number of infrastructure development projects that underpin the Group’s diversification strategy. These were primarily in the areas of wind farm development, resource recovery and strategic water supply. The future direction of the Group seeks to capitalise on large-scale infrastructural projects, whilst continuing to support our cash generative traditional businesses.

Strategic Review


The Bord na Móna Powergen business manages and operates the Edenderry peat/biomass generating unit, the Cushaling peaking plant and the Bellacorick wind farm. There are also a number of development projects that will add substantially to Bord na Móna’s electricity generating capacity over the next decade.

Powergen’s strategy is focused on sustainable business growth through the phased development of a diversified portfolio of generating assets. This will be achieved by leveraging land assets, project development and operations and maintenance capabilities. Powergen will be a leading low carbon electricity generator, with a suite of resources including wind, biomass and other renewables supported by flexible thermal plant.

The Powergen business delivered a satisfactory operating year. It also made significant progress in its development agenda with construction commencing on both the Mount Lucas and Bruckana wind farm projects. The Oweninny wind project was also advanced in joint venture with ESB Wind Development Limited. ‘The Clean Energy Hub’ is Bord na Móna’s concept to develop a number of wind farms operating on our midland cutaway peatlands, which could be linked together to form a renewable energy generation ‘hub’. The power generated would primarily be exported to the United Kingdom. Significant preparatory work was undertaken to position us for this opportunity.


This business is primarily responsible for harvesting and delivering peat feedstock to the ESB’s two peat-burning electricity stations at Lanesboro and Shannonbridge, as well as peat and biomass to our own co-fired plant at Edenderry; it also supplies the peat needed to manufacture peat briquettes and the moss peat used in both household gardening and professional horticulture in the Irish, British and mainland European markets. The medium term outlook for these markets indicates a strong requirement for a lowering of the cost base and a number of initiatives are in progress to deliver this. In addition, the very low harvest has highlighted the importance of progressing to a more variable cost structure, as well as a more competitive one.


Bord na Móna Retail supplies solid fuel, oil, convenience fuel products, professional and retail growing media, for the domestic and international markets. Consumer demand for these products can often be affected by the seasonal weather: for the year under review, the wet spring reduced demand for gardening-related products; but the long winter significantly boosted sales of our domestic briquette, coal and oil heating products.

Peat is the primary feedstock in our retail operations and the very low peat harvest in 2013 resulted in considerable delivery and processing challenges for the business. With the imposition of carbon tax, from 1 May 2013, the business has been focused on extending our brand portfolio with a supporting range of carbon reduced or carbon free products.

Resource Recovery

Resource Recovery’s business environment continues to be very challenging. The market needs increasing clarity of regulation, policy and direction and, to that end, we welcome the policy statement ‘A Resource Opportunity’ issued by the Department of the Environment, Community and Local Government. In the meantime trading remains difficult as macro economic conditions have led to a continuing reduction in waste volumes. The consequent decline in business activity in the industry has resulted in an unhealthy level of aggressive competition and questionable industry practices including below cost selling which have depressed profitability and caused a number of business failures.

Resource Recovery remains committed to delivering exemplary operating and service standards. These will provide us with a competitive advantage in a future, more stringently regulated market. Furthermore, despite the current industry difficulties, we remain committed to higher order treatment of waste and landfill diversion, and we have progressed a number of related infrastructure projects during the past year. This includes the commissioning of a 25,000 tonnes compost facility at our Drehid waste park. We also attained planning permission for the development of a 250,000 tonnes Mechanical Biological Treatment (MBT) unit in Drehid.

Anua – Environmental

Anua is a leading provider in the design, manufacture and installation of a portfolio of differentiated, sustainable technologies, offering clean air and water solutions. Our primary activity is focused on the United Kingdom water and air treatment markets from our base in Bridgewater, Somerset. We also market and distribute our technologies in Ireland, North America and selected European markets.

There is a direct correlation between the level of construction industry activity and the business performance in these markets. The severe market shrinkage experienced at the onset of the global economic downturn shows limited signs of recovery and this will continue to challenge business growth. Our focus on business remodelling and reorganisation will make us more competitive and position us to take advantage when favourable market conditions return.

Monthly Production Vs Monthly Rainfall

Land and Property

The objective of the Land and Property business unit is to generate commercial, environmental and social value from these key assets.

The Bord na Móna ‘Strategic Framework for the Future Use of Peatlands’ guides our decision making in relation to potential future uses and developments on cutaway bogs. During the year we continued our programme of consultation with interested parties on the strategic framework. We also used the framework to guide our preparation of rehabilitation plans for all our bog areas which have been submitted to the Environmental Protection Agency.

Bord na Móna can play a central role in the development of an alternative water supply for the east of Ireland, including the Greater Dublin Area and surrounding counties. Our site at Garryhinch, on the border of Laois and Offaly, has already been identified as the ideal location to construct a reservoir and treatment facility, which would enable water to be abstracted safely and sustainably from the Shannon. The establishment of Irish Water creates a new context for this project and we continued to pursue its development during 2013.

Bord na Móna is a contributing member of the Peatlands Council set up by the Government to develop a strategy for the responsible management of Ireland’s peatlands. We continue to provide technical and other assistance to the National Parks and Wildlife Service, to support them in dealing with the issue of illegal private turf cutting on special areas of conservation.

Our facility at Lough Boora Parklands is an important heritage and environmental destination in the midlands and, attracts significant numbers of visitors each year. During the year the parklands took part in the national BioBlitz where four sites competed to record the most species of wildlife over a 24 hour period, and some 940 different species were identified and codified. We have recently received planning approval from Offaly County Council to develop further the facilities at the site in order to enhance the visitor experience. In addition, the walking routes and cycle-ways at the parklands will be substantially extended this year with the support of Offaly Local Development.

These various works will be completed during the coming year and will further strengthen Lough Boora’s positive contribution to the community. Bord na Móna continues to co-operate with a number of community and wildlife interest groups to facilitate diverse local and regional projects, including conservation projects, promotion of biodiversity and provision of amenities. For example, this year we supported the work being undertaken by Wetlands Heritage Ireland and Lullymore Heritage Group. More generally, we also participated in the preparation of a plan to develop rural recreation under the auspices of the Department of Community, Environment and Local Government.

The annual review of the Group’s Biodiversity Action Plan was carried out in consultation with environmental groups and other stakeholders, and the continuing progress against our targets as set out in the plan was favourably received.

We undertook physical works, drain blocking for example, during the year to promote rehabilitation actively in a number of sites, including Cuckoo Hill in Co. Galway and Drinagh in Co. Offaly. We also extended our sphagnum moss seeding trials with new sites at Kilberry in Co. Kildare and Srahmore in Co. Mayo.

Operational and Financial Review

A summary of the key Group financial results for the past three years is as follows:











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Turnover increased by €42.3 million and €44.1 million in comparison to 2012 and 2011 respectively. There was increased sales activity in the home heating sector with briquette and coal sales up 28% and 22% respectively on 2012 due to the prolonged winter season. Feedstock increased the sale of milled peat and biomass by 430,000 tonnes on 2012 when West Offaly Power had a planned outage of five months. Resource Recovery increased their sales to residential customers with the full year impact of the two acquisitions from the previous year, sales to commercial customers and end treatment sales were also up on last year. Electricity sales in the power-generation business increased by 7% on 2012. On the adverse side growing media sales into mainland Europe were restricted due to the non availability of professional peat following the peat harvest shortfall last summer and sales of retail growing media in Ireland and the UK were also reduced due to the unfavourable weather during the growing season.

EBITDA at €61.2 million was €0.1 million up on 2012 reflecting:

  • additional costs of €21.1 million incurred due to the restricted weather related peat harvest with an out-turn of 1.4 million tonnes, a shortfall of 2.4 million tonnes on the target for the year;
  • increased sales of briquette and coal products;
  • increased sales of milled peat for electricity generation, and
  • the implementation of a mitigation plan to counteract the additional costs incurred on the peat harvest and subsequent knock on effect on the transporting and briquetting of peat. The mitigation measures related to payroll cost reduction measures such as lay-off, short-term working and a reduction in management salaries and non payroll related measures on non critical third party costs.

EBITDA at €61.2 million in 2013 is adverse to the 2011 EBITDA by €11.5 million attributable to a peat harvest of 4.8 million tonnes in 2011 compared to a harvest of 1.4 million in 2013.

Profit before tax of €12.5 million was €25.3 million up on 2012 but the prior year included an impairment charge of €23.7 million on tangible and intangible assets. The profit before tax for 2013 of €12.5 million was €4.2 million down on 2011. The profit before tax in the current year is impacted by the exceptional costs incurred on the peat harvest and the subsequent knock on effects on peat quality and location.

Despite the difficult harvest, the Group had an operational cash flow before capital expenditure of €108.5 million which was €66.2 million favourable to 2012. This was driven, in particular, by the significant reduction in stock levels as a result of the poor harvest experienced in the year. The Group had a net cash surplus of €50.8 million, an improvement of €52.7 million on 2012 after an investment in capital expenditure of €41.8 million and dividend payments of €2.5 million. Net debt reduced from €66.7 million at the start of the year to a closing net debt of €17.0 million a reduction of €49.7 million. The Group had a closing cash balance of €247.2 million to fund its planned capital expenditure programme in the power generation sector.

Shareholders’ funds have been reduced by €7.6 million in the period mainly attributable to an increase in the pension deficits on the three defined benefit schemes and offset by retained earnings of €6.7 million for the year. The key contributing factor to the increased pension deficit is a reduction in the discount rate used to measure future liabilities, down from 4% in 2012 to 3% in 2013.

Investment for the future

Capital Expenditure for 2013 amounted to €39.4 million (€28.3 million in 2012). The capital investment programme undertaken during the year included the first phase of construction of the wind farms at Mount Lucas, Co. Offaly and Bruckana on the borders of counties Kilkenny, Laois and Tipperary. Other key items of expenditure were on production plant for peat harvesting, transport equipment and equipment replacement and upgrade at the two briquette factories.

Research and Development: In 2013 Bord na Móna spent €4 million on research and development including business development, exclusive of grants compared with €5.7 million in 2012. Nine people are directly employed in the Innovation Centre with a further fifteen innovation staff embedded in the operational businesses of the Group.

Funds from Operating Activities

The Group generated €108.5 million from operating activities in 2013 compared to €42.3 million in the previous year. As a result of the peat harvest shortfall there was a significant reduction in stocks of €40.4 million which will require a rebuild in the short-term.





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At year end, the Group had net borrowings of €17 million, a decrease of €49.7 million in the year – a significant achievement given the level of capital expenditure and the challenged trading performance. The detailed cash flow statement is given on this page supported by Note 20 to the Financial Statements.

Capital Structure and Treasury Policy

The Treasury Policy for the Group is approved by the Board of Bord na Móna plc on an annual basis. This policy is implemented and monitored by the Group Treasury function. The Treasury policy aims to minimise overall Group funding costs, maintain flexibility in volatile markets but always subject to acceptable levels of treasury and counterparty risk.

The overall objective of the Treasury function in managing foreign exchange risk is to contribute to the achievement of the Group financial objective of stable euro operating profit growth in a risk averse and cost effective manner and to use natural hedges across the Group wherever possible.

The Treasury policy permits derivative instruments to be used to mitigate financial risks and are executed in compliance with the specification of the Minister for Finance issued under the aegis of the ‘Financial Transactions of Certain Companies and Other Bodies Act 1992’.

The Groups overall debt position was primarily at fixed interest rates. Net borrowings in the current financial year reached a peak of €80 million in August 2012, compared with a peak in the previous year of €109 million. Bank interest and similar charges at €9.9 million compared with €10.5 million which was a decrease of €0.6 million on the previous year.

At year end, the Group had $355 million (€263.9 million) fixed rate debt raised on the US private placement debt market. In order to hedge the associated US dollar exchange rate exposures and convert the underlying interest rates to fixed, the Group entered into a number of cross currency swaps to match the maturity profile of this debt.

The maturity profile of this debt at the financial year end was as follows, 7% repayable in 2014, 16% repayable in 2015, 25% repayable in 2017, 12% repayable in 2018, 19% repayable in 2019 and 21% repayable in 2020.

Gearing was 9% at year end compared to 37% at the start of the year.


Bord na Móna’s vision ’A Contract with Nature’ sets out the context for a roadmap of how the Group will transform itself into a leading provider of sustainable products and services, both in Ireland and abroad. This transformation is driven by the strategic objectives that are set for each business unit. In order to achieve these objectives, various programmes and initiatives have been undertaken across the three fundamental pillars of sustainability: people, planet and profit and relevant key performance indicators have been identified. Bord na Móna measures its progress annually against these key performance indicators and will this year report progress by way of a Sustainability Statement.

‘A Contract with Nature’ contextualises Bord na Móna’s mission, objectives, strategy and values and in effect sets out a clear sustainability path for the Group. It means that all of our business activities, both direct and supporting, will progressively become increasingly sustainable from an environmental and social point of view while continuing to yield profits. This not only drives demand for innovative solutions to the sustainability challenges facing the current activities of each of our operating business units, but also acts as a necessary filter for screening new business development opportunities to ensure ultimate strategic fit.

As the developed world’s economies move towards a low carbon platform, significant opportunities exist for Bord na Móna to become a strong player in the provision of sustainable products and services. Bord na Móna is focused on maximising these opportunities in implementing its vision of ‘A Contract with Nature’.


Bord na Móna will continue to fully utilise its peatland resources to create value in order to develop a portfolio of sustainable infrastructure in Ireland, to support customers’ requirements for renewable energy, water and resource recovery, whilst driving profitability and shareholder return.

We can achieve this because of our strategic land bank, reputation, development expertise and strategic partnerships.

The Group carried out a comprehensive review of our strategy during the year. The review affirmed our broad vision as encapsulated in our mission statement set out above and on this page. We will therefore continue to focus on:

  • leveraging and investing in our core competencies of land, brand/reputation and peat engineering to maximise profit generating activities;
  • continuously evaluating all our activities and invest in those that offer sustainable profitable growth and scalability; we will exit all other activities;
  • developing and acquiring new core competencies;
  • investing in emerging opportunities that leverage our combined core competencies and that are aligned to our corporate vision, and
  • creating an organisation aligned to our corporate vision and values through a business transformation process.

I am confident that this strategy will deliver a sustainable future for Bord na Móna, while contributing to the overall development of Ireland and providing an appropriate return to all our stakeholders.

Gabriel D’Arcy
Managing Director
27 June 2013