The Government has given Bord na Móna the initial green light to pursue deals that its management believes could pave the way for its ultimate privatisation.

The company is in talks with players in waste disposal and alternative energy, but has been seeking formal Government approval for this strategy for several years.

Yesterday it said the cabinet has formally given it this approval, although the Government has known about its contact with private sector operators for some time.

Managing director, John Hourican, has said the company should ultimately seek to leave State ownership through partnerships with the private sector.

He believes that if this is managed properly, it could deliver up to €750 million for the Exchequer. The company's assets are currently valued at €250 million. In a recent interview, he was reported as saying that he would consider resigning if the company could not proceed with its plans.

However, a spokesman last night said Mr Hourican was happy with the Government's approval for the firm's strategy.

In a statement, Mr Hourican said he was pleased with the decision of Bord na Móna's shareholders, natural resources minister, Noel Dempsey, and finance minister, Brian Cowen.

The company's board has also welcomed the decision. Bord na Móna is already involved in a windfarm at Bellacorick, Co Mayo.

It has reportedly opened talks with two waste management companies, NTR-owned Greenstar and Oxegen. These discussions are ongoing.

Separately, talks about granting the workers 5 per cent of the company through an employee share option trust (Esot) became deadlocked earlier this year when the Government said it favoured granting them individual ownership of the shares. However, this matter is also thought to be close to a resolution.

The Republic's commitment to cutting greenhouse gas emissions has limited Bord na Móna's original remit to develop the Republic's peat bogs.