Over the past couple of weeks, since I announced the Government’s plans for a programme of State asset disposals, there has been a lot of mis-information circulating about the Government’s intentions with regard to asset disposals and the impact of any such disposals.
From the outset, claims have been made that the Government was selling off key strategic infrastructural assets, that we would end up selling these off in a fire-sale situation, and that what the Government proposed to do was not in the national interest. I have again heard the traditional criticism that, once the Government contemplates disposing of any State assets, this is likened to selling off the family silver. But, in reality, what family if faced with real financial difficulties and a substantial amount of debt would not consider whatever assets and investments they had to see if they could draw on some of these to reduce their vulnerability.
We, as a nation, are in just such a situation. Our outgoings continue to greatly exceed our income, in the form of taxes and other revenues, and we are dependent on funding from the EU/IMF to meet our day-to-day funding needs. In return, we are required to implement a programme of fiscal reform, that will bring our budget back into balance over a period of time, which we will do. However, as part of this programme, and as we had already agreed in the Programme for Government, we are also committed to reviewing our portfolio of State assets and releasing value from some of these assets at this time of national need – but only on a basis that achieves fair value for the State from any assets that are to be sold, and also in a way that does not damage our prospects for recovery and for future economic growth.
I have heard Deputies opposite point out that the Semi-State companies involved have contributed hugely to our economic development in the past. On this I would agree. They have indeed been significant contributors to our economic development over past decades. However, that is not a justification for refusing to review the contribution that these companies can make now and into the future, nor does it necessarily mean that their continuation in State ownership represents the best way forward – either for the companies themselves or for the State. Time does not stand still and we cannot be prisoners of the past.
Take Bord Gais for example. It has built up a very successful electricity generation and supply business and is now a very valuable asset within the State’s portfolio of assets. However, from a strategic point of view, the question would have to be posed as to why it is necessary, or indeed in the best interests of the State, to have two significant electricity generation and supply businesses in public ownership, which are effectively in competition with each other.
Opposition Deputies have also drawn comparisons with the privatization of Eircom, where the telecommunications network was sold. However, the Government is very conscious of the fallout from the Eircom experience, and the programme of disposals that I announced has been carefully thought through, in order to ensure that any such dangers are avoided and that mistakes that were made in relation to previous privatizations are not repeated.
In that regard, I have already made it crystal clear that the Government has no intention of selling off strategic infrastructural assets. We have agreed to sell BGE’s energy business. Its gas transmission and distribution systems, including the two gas interconnectors, are not for sale. We have agreed to sell some of ESB’s non-strategic power generation capacity, in order to reduce ESB’s market dominance and provide for greater competition in the electricity market. However, ESB itself and all of its strategic assets, including its transmission and distribution network, will be retained in public ownership. We have agreed to give consideration to the sale of some of Coillte’s assets, which is likely to focus primarily on the harvesting rights of Coillte’s forests, but the land on which the forests are situated is not for sale. And we are only agreeable to dispose of the State’s remaining stake in Aer Lingus because the remaining 25% shareholding is no longer a strategic asset as it does not enable the Government to determine Aer Lingus policy in relation to commercial decisions such as the use of the company’s Heathrow slots.
Some Deputies have suggested that rather than sell off these Semi-State assets, we should actually invest further in the assets in question – in areas such as in wind and wave energy – where there is potential to create significant numbers of new jobs in these new emerging technological areas. Other Deputies have suggested that we should go ahead with the sales, but simply keep all of the money raised for reinvestment rather than using any of it to reduce overall debt levels.
However, such suggestions are simply not realistic. Where would we get the funds to invest further in these assets, when we do not have access to the financial markets but are reliant on the EU/IMF Programme for even our current funding requirements. As regards the use of funds generated from the disposals, agreement has been reached with the Troika that one-third of the proceeds can be retained and will be available for reinvestment in the economy to help stimulate economic growth and job creation. This represents a significant shift in the position of the Troika, whose original position was that all of the proceeds were to be used for debt reduction. I am satisfied that this represents a real breakthrough in our negotiations with the Troika, and is a very satisfactory outcome forIreland. It offers the potential for the Government to have access to €1 billion for much needed reinvestment in the economy to provide an economic stimulus and support job creation.
Of course, I should also mention, in this regard, that the Government has also reformed the manner in which the State, as shareholder, engages with its key Semi-State companies. Last year we established NewERA, which is now taking a pro-active role in overseeing corporative governance from a shareholder perspective of theCommercialSemi-Statesin the energy area – ESB, Eirgrid, Bord Gais, Bord na Mona and Coillte. NewERA is now advising Ministers in relation to proposals for new capital investment by these companies, approval of borrowings, dividend policy, etc. NewERA is also working closely with the Strategic Investment Fund and the National Pensions Reserve Fund to ensure that potential commercial investment opportunities are identified and developed. So, in addition to disposing of some of our non-strategic State assets, the Government is also seeking to make the best use of the rest of the State’s portfolio of assets, which includes identifying appropriate opportunities for further investment in the sector.
As I have said earlier, there have been a lot of mis-informed comments about the Government’s asset disposal plans over recent weeks. However, in fairness, I would also have to acknowledge that I have also heard some legitimate concerns being raised, by opposition Deputies and others, in relation to some of the wider implications of the proposed asset disposals, and in particular in the context of Coillte and its forests.
- Fears have been raised about a potential lack of public access to the forests for walkers and for general recreational purposes.
- Queries have been raised about whether the forests, if sold, would be replanted after the trees had been harvested.
- Questions have been raised about the impact of any disposal of Coillte’s forests in terms of the climate change agenda, and the position in relation to carbon credits in particular.
- More generally, questions have been asked about whether the Government has engaged with the staff interests in the companies involved in relation to the planned disposals.
I accept that these are all genuine concerns, but I can assure the House that these issues were already identified in the preliminary analysis that was undertaken by the Interdepartmental Working Group which reported to Ministers in December 2011. That Group considered a range of State assets identified by Government as potential candidates for disposal, which included Coillte. I can confirm that the Government is conscious of all of these issues, and that these will all be taken into account before final decisions are taken by the Government in relation to what assets of Coillte are to be sold, and how.
In that regard, I would point out that I have already explained that the Government decision with regard to Coillte, and its assets, is different from that in relation to Bord Gais and ESB. Whereas specific decisions have been taken, and announced, in relation to the assets that are to be disposed of in the case of the energy companies, no such definitive decisions have yet been taken in relation to Coillte. The Government has agreed that Coillte is to be included in the asset disposal programme but my announcement of last month indicated that further consideration had to be given to how this was to be done. I have already indicated that any disposal in the case of Coillte is likely to focus primarily on the harvesting rights of its forests, but that is primarily because I wanted to make it clear that there would be no question of any disposal of Coillte’s land holdings. However, a final decision on how best to release value from Coillte still remains to be taken by Government.
A Working Group, comprising my Department, the Department of Agriculture Food and the Marine and NewERA, is currently considering this matter in detail. NewERA is preparing a valuation of the company and its assets, and the Working Group will report back to Ministers by the end of March with the outcome of this assessment. Its report will also set out any policy, regulatory, legislative, corporate governance and/or financial issues that would need to be addressed in order to facilitate a disposal of Coillte or its assets.
On completion of this report, together with similar reports also being prepared on Bord Gais Energy and ESB’s non-strategic power generation capacity, the Government will be able to take further decisions in relation to how best to proceed with the implementation phase of the asset disposal programme already announced. I can assure the House that the Government will ensure that all of the implications of each asset disposal will be carefully considered, with a view to mitigating any potential negative impacts associated with the disposals. This will include ensuring the continuity of access to the forests as a public amenity.
International investors are again beginning to look favourably onIreland’s long-term growth and prospects. The indications are, therefore, that there should be significant interest in investment opportunities in Irish assets. We hope, and fully expect, to benefit from this renewed international interest, as our State assets are prepared to be brought to the market and I am confident that we will be able to secure good value for the assets when these will be offered for sale.