Michael Moynihan (Cork North West, Fianna Fail) | Oireachtas source

I wish to share my time, but I will conclude after 15 minutes on the Second Stage of the Gas Regulation Bill 2013. I thank the Ceann Comhairle for the opportunity to speak on the Bill. Fianna Fáil will be opposing this Bill which will result in the passing of one of Ireland's most profitable companies, Bord Gáis Éireann, BGE, from State ownership to the private sector. There are four elements to our opposition to this piece of legislation including the current expected sale price which it appears will be an undervaluation of the company; the lack of clarity over where BGE's current net debt will be placed and the future employment of those contracted to BGE after it is split in two; the uncertainty over the future of Irish Water as a public utility company which is part of BGE; and the lack of a clear plan of investment for the proposed revenue to be generated by the sale of BGE.

The EU-IMF memorandum of understanding agreed in December 2010 does not require the privatisation of BGE in whole or in part. Those who claim otherwise may not have read the memorandum and are just repeating what they have heard, but I believe they are simply misleading people. Importantly, the discussion of the sale of assets in the original memorandum does not take place in the fiscal section but rather in the section regarding obstacles to competitiveness. In other words, if there is to be a sale of a State asset, the objective is not to write down debt but to improve competitiveness. The sale of Bord Gáis is a competitive measure. We do not sign up to the privatisation of the company, for the following reasons.

BGE is one of Ireland's largest energy suppliers which supplies gas and electricity to businesses and homes throughout Ireland, North and South. Since its establishment in 1976 Bord Gáis has been one of the most successful public enterprises in the State. The Labour colleague of the Minister sitting opposite me, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin stated on 24 April 2012 that "Bord Gáis Éireann is an excellent example of a strong, vibrant and dynamic State company, which has demonstrated its capacity to invest and develop new, efficient and competitive business for the benefit of Irish consumers." Bord Gáis is a model which should be followed by other public enterprises. Now, this Government has decided to sell the company despite its significant value to the State.

BGE has been a deeply valuable asset to the State and would continue to be as a public enterprise. In 2012 BGE paid €23.8 million to the Exchequer, bringing the total dividends paid to the Exchequer since the inception of Bord Gáis in 1976 to €854 million. Bord Gáis is a profitable and expanding State company. Last year, total revenue grew by 1% to €1,625 million. Profit before income tax increased 29% to €121 million. This is an impressive result given the current economic circumstances. The company itself runs an expansive energy supply business in Ireland servicing over 700,000 customers in the gas and electricity markets, a 445 MW combined cycle gas turbine plant at Whitegate in County Cork, a large scale portfolio of onshore wind assets and a growing energy supply and distribution network business in Northern Ireland.

Bord Gáis has also helped in ensuring Ireland reaches its renewable energy targets. The company is a key player in improving Ireland's renewable energy capacity having invested heavily in the Irish wind market. Where private enterprise, individuals or small companies have come together to develop small-scale wind farms around the country, BGE has been there to assist and has invested strongly. The mechanism BGE has used to bring energy generated by wind turbines to the substations and the exemplary way it carries out the work on the road network and through the countryside are a joy to behold. There is a major issue developing regarding wind energy and connection to the grid and the fears of many local communities regarding wind energy can be seen as an example. I have seen it at first hand when a small-scale wind farm developed close to me was brought to the grid. There are many concerns in communities about shoddy workmanship but the way that work was done was second to none and should be seen as an example of how that work should be done in further wind energy developments across the country. BGE has played a key role in helping small developers, individuals and co-operatives, in the wind energy market.

BGE operates 15% of the installed wind capacity in Ireland. At the end of December 2012, the company had 174 MW of wind projects in construction, 100 MW to be brought to financial close within 24 months and a further 350 MW of medium to long-term wind development. These are impressive results and reflect the ability of this company as a public enterprise to deliver projects which are not only commercially viable but also hugely beneficial to the State. One would image that the Government would have a number of exceptionally convincing reasons for selling this State company. Unfortunately, this is not the case.

First, it is obvious that the sale price of BGE would reflect current market sentiment and international activity in the energy sector. The price at which BGE is to be sold is uncertain. Originally, the Government had an expectation that the sale of BGE would fetch an estimated price of between €1 billion and €1.5 billion. Recently, however, Davy has estimated that the sale is likely to be on the lower end of that scale. Some sources familiar with the sector believe the price could be as low as €800 million. This is a very worrying development. It does not inspire confidence on this side of the House in the Government's ability to get the best deal possible for the current owner of this company, the Irish taxpayer. The lower price estimate may reflect an expectation of increasing competition in Ireland's energy market or concern relating to other international energy matters. Nonetheless, the current uncertainty leads us to believe that now is not the time to sell one of the most profitable State assets. Given the fact that BGE is a very profitable company, with profit before income tax of €121 million last year, and the fact the company has assets of approximately €4.6 billion, Fianna Fáil believes any sale reaping less that €1.5 billion would represent a fire sale of the company by the Government. We need to ensure the taxpayer is not short changed and private investors rewarded in an unduly generous fashion.

There is also a lack of information as to how the current company debt is going to be divided and whether employees will be guaranteed jobs in the newly privatised energy company.

With the sale of Bord Gáis Energy, the State will no longer receive a significant dividend from the Bord Gáis group. It will instead receive a once off dividend payment to the Exchequer from the sale. It is still unclear how the company's current net debt of €1.9 billion will be divided between the newly privatised energy company and the State-owned transmission and distributions company. Any ongoing liabilities remaining with the State company must be outlined well in advance of the sale. Fianna Fáil is greatly concerned by this given the new State distribution and transmission company's decreased ability to service the debt if its most profitable aspects are privatised. We want clarification on the division of its debt liabilities and demand a Government-backed plan to be prepared on how any ongoing liabilities held by the State-owned company will be serviced.

Similarly, there is a need for clarification on whether those currently employed in Bord Gáis Energy will remain employees of the company in the long term. The employees will be transferred when the immediate privatisation of the company occurs but there is no guarantee that the newly privatised company will not seek redundancies. Some reports have suggested that if the company is purchased by another European energy consortium certain customer service jobs will be lost or moved outside the country. Clarification as to pension liabilities and their distribution between the two companies must also be sought. The privatisation of Irish Sugar, which was one of Ireland's most successful companies, resulted in people being unable to access the pension funds to which they had contributed over many years. The evidence suggests that commitments on pensions have not been honoured subsequent to the privatisation of companies.

The Government has recently passed legislation to create Irish Water as an independent, State-owned subsidiary of Bord Gáis. This company will be one of the most important utility companies in Ireland and will bill all households for their use of public water supplies. Fianna Fáil is seeking a guarantee from the Government that Irish Water will not be privatised in a similar manner to Bord Gáis Energy given the national strategic importance of its infrastructure. The move to transfer ownership of all water assets to Irish Water from local authorities has caused concern that it could in the future raise commercial capital using these assets as collateral, thereby allowing them to enter private hands by default.

The Government has stated that half of the proceeds from the sale of Bord Gáis will be available to fund employment enhancing projects of a commercial nature. A clear plan of investment is desperately needed to encourage increased employment in our capital starved economy. The Government must outline the exact projects it intends to fund from these proceeds. The infrastructure and capital investment framework for 2012 to 2016 envisages a 60% reduction in Exchequer capital investment in 2014 from its peak in 2008, with the allocation in 2014 of €3.25 billion representing less than 2% of GDP. This cut in capital expenditure is too deep. The Government needs to confirm where the revenue raised will go and how it will increase employment.

Given the fact that Bord Gáis is a very profitable company, with profit before income tax at €121 million last year, and the fact the company currently has assets of approximately €4.6 billion, Fianna Fáil believes any sale reaping less than €1.5 billion would represent a fire sale of the company by the Government. We need to ensure that the sell-off does not become a fire sale of an impressive state asset resulting in the taxpayer being short changed and private investors being rewarded in an unduly generous fashion.

The sale of Bord Gáis Energy was part of Fine Gael's five point plan to revitalise the Irish economy and increase employment levels. The justification for privatisation of State assets was the potential for massive investment in national infrastructure projects and the creation of 100,000 jobs. Fine Gael has so far raised none of the promised €7 billion for job creation through the sale of State assets. In fact, according to CSO's labour force survey, 1,841,800 people were employed in the first quarter of 2011 compared to 1,845,600 in first quarter of 2013. This shows a dismal net increase of 3,800 new jobs since the Government took office. This number is approximately 160 new jobs a month against a background of some 445,000 unemployed people. This is a long way short of the promised 100,000 over five years.

The Government must not only weigh up the long-term cost to the Exchequer of the sale of the company but also ensure that the current employees are protected in terms of their jobs and pensions. It has often been the case that the mistakes are only recognised 15 or 20 years after the privatisation of State companies, when vulnerable people are exploited. This Bill should be withdrawn because it is the wrong step at this juncture and we oppose it.

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