€111m sale windfall boosts Coillte green energy strategy

Forestry firm to increase its dividend to taxpayers and seek development partner to build wind and solar projects

State forestry company Coillte is to reinvest part of a €111m windfall in a new partnership focused on fresh energy projects.

The company is on the hunt for a development partner to build out solar farms and wind farms. The funds come from the sale of all of Coillte’s operating assets to Greencoat Renewables.

Coillte boss Fergal Leamy said the company would increase its dividend to the State on the back of the deal.

But the effect of that will be diluted somewhat by the fact that buyer Greencoat has itself been heavily backed by the State, raising almost €80m from the Ireland Strategic Investment Fund (ISIF) at the time of its €270m IPO. AIB – 70pc owned by the State – invested €15m.

Neither ISIF nor AIB participated in a separate €110m fundraising by Greencoat during the summer however.

Mr Leamy told the Irish Independent yesterday that the idea of trading energy from wind farms full-time would be “out of our comfort zone”.

“We always saw ourselves as a developer of these assets and then we’d sell them on. The price is significantly higher than we expected – it’s a phenomenal result. We had huge interest internationally and it was an incredibly competitive process.”

The company is now mulling the right structure for a new partnership. Mr Leamy said it hadn’t “officially started any process” of taking a partner on board but said it was looking to put the arrangement in place in the coming months.

The wind farm sale sees Greencoat take Coillte stakes in a number of projects. Other shareholders including the likes of the ESB and Bord na Mona will hold on to their shareholdings.

Coillte has invested €25m in developing the farms alongside its partners. Greencoat has purchased the equity in the projects for €136.1m – an €111m gain for Coillte.

Greencoat has also bought debt attached to the projects which give the deal an enterprise value of €281m.

Mr Leamy joined Coillte from private equity firm Terra Firma, having previously worked at Greencore.

He said the State should consider lifting the pay caps at state bodies in order to make it easier to attract talent. But he said the pay structure should be aligned with the “longer-term nature of the assets”, avoiding excessive short-term incentives.

Coillte owns around 7pc of the land in the State. It has identified around 15,00 hectares that would be better used for other purposes, including in some cases housing. One housing project in Galway has received planning permission.

Coillte was advised by IBI Corporate Finance, McCann Fitzgerald and Capricorn Real Assets on the sale.