Arthur Morgan (Louth, Sinn Fein)
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Question 183: To ask the Minister for Communications, Marine and Natural Resources if his Department approved a borrowing of €371,959.94 by a company (details supplied) for the purchase of a dredger; if he is satisfied that requirements under the code of practice for State bodies were met, including sections 6.1, 6.2 and 6.4; when consent issued in this case; and if he will make a statement on the matter. [39427/05]

Pat Gallagher (Donegal South West, Fianna Fail)
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Under the National Development Plan 2000-06, Dundalk Port Company was approved for grant aid at a rate of 40% up to a maximum of €1.2 million for the development of the port's infrastructure. A letter of offer issued to the company on 23 July 2003. The company received estimates of €4.5 million to €7 million for the dredging element of the project. The company could not finance such expenditure and instead made the commercial decision to purchase a dredger to carry out the dredging work itself. The company proceeded to borrow the necessary funding for this purchase.

Section 23(1)(b) the Harbours Act 1996 gives the company the power to borrow funds only with my consent and that of the Minister for Finance. On 17 October 2003 the company requested such consent for borrowing of €400,000 but the company had already drawn a bridging loan of €371,959.94 on 1 October 2003 without the necessary consent. The company was requested a number of times to provide supplementary information in order to assess whether retrospective consent from the Minister for Finance and myself could be granted. However, sufficient information to allow me make that assessment was not forthcoming. In the course of this process, a number of other corporate governance breaches by Dundalk Port Company relating to other unauthorised borrowing and the unauthorised establishment of a subsidiary company came to light.

To date, €224,000 of national development plan funds has been approved for payment. Failure to regularise the corporate governance breaches outlined above has meant that a number of further applications from the company for drawing down of NDP funding have not been approved thus far. Together with difficult trading conditions for the port, this has resulted in a deteriorating financial situation for the company.

In early September 2005 I approved the appointment of a suitably qualified expert in finance and corporate governance matters to provide the Department with a report on the state of affairs of Dundalk Port Company on the grounds of persistent breaches by the company of the requirements of the Harbours Act and the code of practice for the governance of State bodies, the company's demonstrable failure over time to effectively engage with the Department to rectify these breaches and to manage its affairs in compliance with the requirements of the legislation and the code of practice and an oral report by the company's chief executive to the Department of the deteriorating financial situation of the company.

A firm of accountants — Baker Tilly O'Hare — was appointed on 16 September 2005. The final report was received on 24 October 2005. A procedure for implementing the recommendations of the report has now been agreed with the Department of Finance. The report contains a number of recommendations for the financial restructuring of the company and recommendations for improving the corporate governance of the company. The report also includes a recommendation for a restructuring of the company's unauthorised borrowings.

The report has been sent to the chief executive officer and the chairman of the company. The chief executive of the company is meeting the Secretary General of my Department shortly and I am due to meet the chairman of the company. We will impress upon the company the gravity of the situation and inform the company how it is proposed to implement the recommendations of the report. The Department and I will closely monitor the implementation of the recommendations over the coming months. Proper implementation of the report's recommendations over the coming months will enable the company's situation to be regularised and will allow the port to develop further and continue to provide important port services to its hinterland.