Mr. Michael McNicholas:

I am the group chief executive of Ervia, the parent company of Irish Water. Mr. Grant is managing director of Irish Water, while Mr. Marley is Ervia's group finance director. We will make a brief presentation.

We have been asked to address the funding of Irish Water since its establishment and its projected funding for the next ten to 15 years. In our presentation we will set out why this funding is needed, the full amount used to date and the funding we believe we will need in the next ten to 15 years. Most importantly, we will explain what has been delivered to date with the funding we have received and what we will deliver in the future with the funding we are seeking.

I assume everyone has the slides in front of him or her. Looking at slide 4, a review of water services carried out in 2011 as part of the water sector reform programme identified significant shortcomings in water services in Ireland. These shortcomings have been well rehearsed in public in the past 18 months, but I will put them in context. Up to 50% of the water we produce expensively is lost through leakages. In 2013, 24,000 people were subject to long-term boil water notices, that is, they had had to boil water for a number of years. Over 1 million citizens were at risk of contamination of water supplied by 121 water treatment plants. One in three wastewater treatment plants is overloaded, which means that the volume of material they are receiving is greater than the volume they can handle.

Therefore we are putting wastewater which is not at a required standard back into our receiving waters and 70% of our sewer network is leaking. We were then pumping raw sewage, which is untreated, into our rivers and our receiving waters in 44 locations and 150,000 properties had lead services and much more in terms of deficits and lack of service quality was identified in that report.

We have been here before. In the 1970s, Ireland's gas network was in a similar condition with cast iron pipes, very poor infrastructural condition, significant gas leakages, actual explosions and the risk of explosion on the network. Bord Gáis Éireann was established as a public utility in 1976 to address this situation. Over the next number of decades, it undertook a massive rehabilitation and network expansion programme to repair the network and to take advantage of the natural indigenous gas that was found off the west coast of Ireland. That investment programme by that public utility has resulted in a situation where today we have one of the most modern and secure gas network infrastructures in Europe. We have a similar situation with our water services but it is a much more complex challenge, mainly because of the scale of the assets on the ground. We have 900 water treatment plants, over 1,000 wastewater treatment plants, 63,000 km of water mains and 32,000 km of sewers serving our water and wastewater infrastructure needs in Ireland today. That scale and complexity right across the country makes it a challenge greater than what was faced by Bord Gáis in 1976. It is exactly the same type of challenge, just much larger. The decision was made to create a single public utility to take responsibility for managing our water services.

The benefit of a utility is that it brings a structured approach to addressing these challenges and a standard approach to asset management. That is the specification, design and the performance expectation that we set out for the assets. There is a standard approach to how we operate and maintain those assets. It also brings a national approach to investing all of the capital that is needed. That means we are optimising the capital and minimising the amount of capital we need to get the greatest benefit in terms of improving our assets, improving our infrastructure and delivering the service. A single public utility also creates a company that can attract external funding and financing and that has been proven by all of the other Irish utilities we have. They are very attractive as organisations to attract external funding for the significant capital investment needed to repair our infrastructure. The systematic and structural approach to managing those assets and the economies of scale one gets from a single organisation mean we can reduce the costs of those services, deliver much more efficient service and deliver much better customer service to the consumers of the product.

In mid-2012, Bord Gáis Éireann was given the mandate to set up this new public utility. It leveraged its experience and capabilities to set up the Irish Water organisation. One will see from my presentation that we have created in Irish Water an organisational model that is identical to the one that exists in Bord Gáis Networks. It is exactly the same fundamental building blocks that one has in any utility but it was modified to meet the needs of a water utility.

The operation of all modern utilities in the world today is underpinned by eight key systems. It is these systems and the processes associated with those systems that bring the standardised approach to operating, maintaining and running our water utility. This allows us to build, operate and maintain the assets and drive efficiencies in an organised and structured manner. Bord Gáis Éireann has these eight systems in existence, as it did in 2012, within its Gas Networks Ireland business. It built a second version of those systems, modified to suit a water utility, for Irish Water. Over an 18-month period, a programme was put in place in which those systems were built, modified to suit a water company and integrated so they all worked and transferred data between one other. It got them up and running for Irish Water to be able to take over water services at the beginning of 2014. To do that, the company used specialist external companies. These were software engineers, hardware engineers and system integrators to help us build those eight systems over that 18-month period. This is the standard practice for all utilities worldwide. That is the investment of €173 million that established Irish Water.

In doing that, just like any other utility, we did use external companies who were experts in systems integration and software modification to put together that full organisation plus those systems and capabilities. That investment of €173 million created a new Irish company with all of those systems and capabilities in 18 months and we have benchmarked this at €100 million less than would have been done by any other company starting from scratch.

As well as creating Irish Water, Bord Gáis Éireann changed from being Bord Gáis Éireann to becoming Ervia, which is a 100% Irish-owned semi-State company. We are owned by the people of Ireland. They are our shareholder but we are represented, if one likes, by the Minister for Housing, Planning, Community and Local Government, who is the shareholding Minister with overall responsibility for Ervia, Gas Networks Ireland and Irish Water. The operation of that company is overseen by an independent board whose role it is to ensure that Ervia and the subsidiary companies are well governed and that we deliver on the objectives that are set for us as an organisation. The final slide sets out the board members who are serving as Ervia's board today. They bring strong financial, HR, business and utility experience to bear on the company. There is strong engineering and infrastructure experience in water, energy, telecoms and transport among the board members of the organisation. The board oversees me and my management team in regard to how we run Ervia, Irish Water and Gas Networks Ireland as subsidiary utilities in order to ensure we deliver on the business plans and objectives that have been set for us.