AFTER years of operating in the shadow of its larger siblings, the ESB and Bord Gáis, the state's third energy company, Bord na Móna, has found itself unexpectedly thrust into the spotlight by the recent An Bord Snip Nua report.

Unfortunately for its managing director, Gabriel D'Arcy, the low-key semi-state company was singled out for criticism rather than praise by the special group chaired by UCD economist Colm McCarthy.

The group said the company, having strayed well beyond its original mandate to manage the state's bogland, should either be privatised or rationalised through a programme of non-core asset disposals.

These brief comments have sparked a surprisingly intense debate over the oft-forgotten semi-state firm, whose rare incursions into the public eye largely consist of occasional job announcements.

For those who argue that Bord na Móna should remain state controlled, such as Labour's energy spokeswoman Liz McManus, it is a "profitable state company that is meeting an essential need". For others, however, the company is a relic from 1950s Ireland, desperately seeking a new mandate to justify the maintenance of 2,366 state jobs, many of which are located in politically sensitive areas of the Midlands such as Taoiseach Brian Cowen's own constituency of Laois-Offaly.

"It [Bord na Móna] owes its existence to regional labour market policy, designed to create and maintain jobs in the Midlands. But you don't need a state company to do that. The state could easily and more cheaply subsidise private employers to provide jobs," said Professor Richard Tol of the ESRI, who is in favour of privatising the company.

Bord na Móna's managing director Gabriel D'Arcy admits the company's continued survival has little to do with its original core business – harvesting peat – which now represents just 35% of its annual turnover.

"If Bord na Móna had adopted McCarthy's view on life and stuck to its core activities, Bord na Móna would be out of business today," he said. "We wouldn't be capitalising on all the key skills, positional advantages and capability advantages we have developed over the years."

This expansionist drive has seen the company develop interests into such diverse fields as emissions control technology, waste management, coal distribution, water treatment and non-peat electricity generation. This diversification has been hailed by supporters of the An Bord Snip Nua report as proof that Bord na Móna is a semi-state gone mad. But D'Arcy said the company only expanded into logical extensions of its core activities.

"All the diversification the company has done has been related to our business. For instance, we're in resource recovery [waste management] because of its link into our horticultural arm. The link is that our biggest market for horticulture, Britain, has strict targets about going peat-free in all composts," he said.

"We have developed a technology to compost green waste. Our problem is getting access to green waste so we've become involved in resource recovery to do that. It's all related diversification."

D'Arcy also dismisses suggestions that Bord na Móna is heavily reliant on state assistance, even though more than €120m of its sales, the equivalent to 30% of its annual turnover, are attributable to government measures designed to promote peat.

The company's annual report indicates that it earned €64.8m last year from milled peat sales to the ESB for two peat-fired power stations which it is legally obliged to run.

Meanwhile, its electricity sales of €56.7m stem from the fact that Eirgrid, the national grid operator, is legally forced to accept power from Bord na Móna's Edenderry power station even when it is more expensive than other sources.

In all, this state assistance is worth ten times more to Bord na Mona than the €12m dividend it paid the government last year.

A recent study from UCD's Electricity Research Centre also revealed that the taxpayer subsidised peat-fired power stations by between €2m and €103m per year between 2003 and 2007 through the public service obligation (PSO) levy. These figures are disputed by D'Arcy.

"For the last five years, wholesale price of electricity has been about 30% to 40% higher than the Bord na Móna price of electricity. In the last six months, that price has collapsed and it's beneath the Bord na Móna price. But we are confident we could compete very effectively on the public market," he said.

D'Arcy told the Sunday Tribune that state ownership wasn't impeding the company but, like so many things in the semi-state sector, the decision to privatise Bord na Móna will have little to do with its business needs.

The choice is likely to be a political one with some sources already wondering whether Cowen is prepared to sacrifice state jobs in the midlands.

The unions are already gearing up for a fight with Greg Ennis, the secretary of the Bord na Móna group of unions, warning that they will use "any mechanism at our disposal to resist any privatisation".

"We've seen what's happened in the past when Eircom and Aer Lingus were privatised and jobs were lost and salaries cut in a race to the bottom," he said.

EXECUTIVE salaries at Bord na Móna are out of line with those at its two larger semi-state peers, the ESB and Bord Gáis, according to details contained in its annual report.

Bord na Móna's managing director Gabriel D'Arcy (right)?was paid €419,000 in 2008, when the company's revenues hit €400m for the first time, according to the report.

By comparison, his high-profile equivalent at Bord Gáis, John Mullins, received €361,000 in 2008 – almost 14% less than D'Arcy even though his organisation made €1.37bn that year.

Meanwhile, ESB chief executive Padraig McManus received just under €535,000 in 2007, the last year for which figures are available, despite his helming of an organisation which has revenues of €3.46bn.

When asked about his salary, D'Arcy said that he was unaware about how it compared with Mullins and McManus.

"I am aware though that the commercial semi-state salaries are governed by the Hay report on executive pay and I know that, from my point of view, I am at the lower end of the Hay report," he said.

Where Bord Na Móna makes its money

Coal................................................ €66.1m

Peat for power stations.............. €64.8m

Electricity generation................. €56.7m

Waste management....................... €52m

Horticulture.................................. €47.6m

Briquettes..................................... €44.7m

Heating oil..................................... €35.9m

Environmental products............ €18.6m

Other fuels........................................ €10m

Others.............................................. €5.2m