Mr. Seamus McCarthy:

I thank the Chairman. As the committee is aware, the Dublin Docklands Development Authority was established in 1997 to secure the physical, social and economic regeneration of the docklands area on a sustainable basis. It is a non-commercial State body with a commercial mandate and has operated generally without Exchequer funding. In May 2012 the Government announced its decision to dissolve the authority and transfer its planning and development functions to Dublin City Council. The actual dissolution date has not yet been determined. In the meantime, the authority has a transition business plan in place to resolve the liabilities of the authority through the liquidation of assets, including the transfer of the relevant infrastructure, and to deal with any remaining litigation.
The authority's gross surplus for 2012 was €2.3 million as compared with €7.6 million in 2011. After taking account of operating and other expenses and impairment costs charged in the year, the authority reported an operating deficit of €5.5 million. In addition, the 2012 financial statements recognise an exceptional gain of €8.4 million as a result of a commitment given in July 2013 by the Department of Public Expenditure and Reform that it will assume the authority's future pension liabilities on dissolution. At the end of 2012, the authority had net assets of just over €5 million. It held investment properties valued at €23 million and had creditors that were owed €24 million. A significant proportion of the liabilities was made up of a bank loan and amounts due to other State agencies in respect of levies collected on their behalf. The authority recognised that its capacity to meets its liabilities depended on its ability to liquidate its property assets and to collect its debts. I understand that the authority disposed of significant amounts of property during 2013 and in the early part of this year and the authority has provided the committee with an update in that regard.
I would like to take this opportunity to comment on a matter raised by Mr. Paul Maloney when he appeared before the committee in connection with the Irish Glass Bottle site acquisition and in subsequent correspondence. This concerns the executive board's decisions about the authority's financial exposure to the Becbay joint venture. My understanding is that Mr. Maloney takes the view that the executive board was fully aware at the meeting of 2 November 2006 that it was agreeing to a financial exposure for the authority in excess of €61 million, comprising a guarantee to Anglo Irish Bank of €26 million, 26% of the interest that would accrue on Becbay's loans for two years and up to €35 million in other shareholder funding.
As explained in Mr. Crawley's note to the committee of 21 January 2014, these are the terms given effect in the shareholders agreement signed on 9 November 2006. We estimated that the authority's exposure increased to around €82 million by the end of 2010. Further liabilities had accrued by the time the authority concluded its agreement with NAMA in July 2011. The point raised by Mr. Maloney relates to the executive board's decisions about the financial commitment, as documented in the board minutes and papers.
I have reviewed those records again and note a number of key points, which follow. The board minutes of Friday, 20 October 2006 record, at paragraph 7, that the authority's equity contribution to the joint venture would be €9 million, to be provided from existing resources. The board also noted that the remainder of the required funding would be raised through bank borrowing, secured solely on the Irish Glass Bottle site. The board minutes of Tuesday, 24 October 2006 state that the director of finance outlined to the board that the maximum liability to which the authority would be exposed if the proposed site acquisition agreement went ahead was €36 million, comprising shareholders loans and equity amounting to approximately €29 million and an additional €7 million in recourse finance which would have to be available to the joint venture company. It was on this basis that the decision to commit to the bid for the site was made.
The board minutes of Thursday, 2 November 2006 deal with a number of issues that had arisen in the course of progressing the agreement terms with the joint venture partners and the joint venture funders. The minutes include references to guarantees to be provided by the authority in relation to Becbay's proposed borrowing, subject to upper limits being set in relation to the potential liability arising from the guarantee. A related board paper refers to the proposed guarantee provisions increasing the liability of the authority. Estimates of the additional exposure related to the guarantee are not given but a limit of €35 million is mentioned.
The draft heads of the shareholders agreement presented to the board on the same day state that all the costs incurred or losses in the joint venture shall be sharedpro rata between the shareholders, provided always that the total recourse to the Dublin Docklands Development Authority under any loans to the joint venture company, guarantees or in any account whatsoever in respect of the acquisition of the Glass Bottle site or otherwise "shall not in aggregate exceed €35 million".
In my view, taking account of Mr. Maloney's evidence, the records kept by the authority in relation to the executive board's decisions on this matter are ambiguous at best. Evidence from members of the board may ultimately be required to clarify the matter. In effect, Mr. Maloney's evidence appears to be that the executive board decided in less than two weeks to increase the authority's financial exposure to the joint venture from €9 million to over €61 million. In my view, decisions of that nature should be very clearly stated in the relevant records. The justification for the increases in financial exposure and the implications for the expected returns from the investment should also be clearly recorded.