Like any company, Bord na Móna faces a number of external challenges at any given time. We operate a diverse portfolio of businesses in a number of sectors. Each of these sectors have their own inherent obstacles and challenges.
Looking at Bord na Móna on a macro level a number of key challenges become clear, both in the immediate and medium term. In the 2015 financial year, our Fuels business experienced the significant adverse impact of the carbon tax, carbon credit pricing, and cross border fuel trading.
In the medium term, we will face challenges in obtaining planning consents for infrastructural developments, pay-by-weight in our Waste & Recovery business, the implementation of the Peat transformation programme, and the expiry of the current long-term Peat Supply Agreements. Another medium term challenge is the cost effective supply of biomass to both our power generation (Powergen) business, and the ESB peat stations post 2019. Despite these challenges, the outlook is very positive. Bord na Móna is a company in transformation with many of our businesses undergoing change. We are looking to the future and embracing the new.
The Peat business faces significant challenges in all its core markets and has begun a major transformational change programme in order to create a sustainable business and sustainable employment. The supply price for peat will reduce and in turn the business will move to a variable cost model in order to reflect the increasingly variable nature of our business. The traditional management structures in the business have been replaced by a more customer focused structure with clearer goals and responsibilities.
Powergen’s major operational challenge is the optimization of the existing generation asset base, in a changing market and an evolving regulatory environment, so as to preserve the useful asset life while maximising output and economic returns.
The solid fuel industry is at a point of significant challenge in a number of areas. In particular, the challenge brought by the expanding range of legislative pressures on the business. Retail prices of solid fuels have risen significantly due to the imposition of the carbon tax. This is having a negative impact on solid fuels sales.
The carbon tax has also presented a competitive disadvantage due to low levels of visible enforcement, specifically related to imports from Northern Ireland. As a result of non-compliant behaviour the Irish solid fuel industry is being put at serious risk. In 2015, Bord na Móna became responsible for an Energy Efficiency Obligation – the only Republic of Ireland solid fuel supplier to hold this responsibility.
Our answer to this challenge was to begin looking at lower carbon sources of domestic fuel. We have introducing a range of kiln dried and air dried wood products and are currently developing a variety of biomass fuel products for domestic heating. Both of these product ranges will release significantly less carbon into the atmosphere.
Bord na Móna’s horticulture business is doing well but is not without challenges. In the UK growing media market, there is a continued focus on helping our expanding customer base meet the regulatory drive for peat dilution and sustainably sourced growing media. This activity is being undertaken with a continuing focus on remaining competitive in the face of additional Peat costs and freight charges.
Although slight growth was seen over the last year in waste volumes collected, particularly in the commercial market, industry over-capacity continues to prompt aggressive product pricing. This pricing dynamic has resulted in a challenging market place for all providers including Bord na Móna’s Resource Recovery business.
The full introduction of the mandatory Pay-by-Weight service type for the domestic sector was postponed until July 2016. This service typically results in a decrease in collected waste volumes and therefore may negatively impact the revenue achieved per customer. From January 2016 the Drehid landfill facility licensed capacity for disposal will reduce from 360,000 tonnes per annum to 120,000 tonnes. As a result of this reduction in capacity, increased operational costs per tonne will be experienced.