I move: "That the Bill be now read a Second Time."
In 1965 the State acquired the British and Irish Steam Packet Company Ltd., the principal object being to ensure effective Irish participation on the Irish Sea in the interests of trade and tourism. The purchase price was £3,600,000. The issued share capital of the company at that time was £1,600,000.
The assets of the company at the time of their takeover by the State consisted principally of three vessels, the old Leinster, Munster and Innisfallen, which carried passengers, goods and livestock and a limited number of cars, four cattle/general cargo vessels, the Kilkenny, Meath, Dundalk and Glanmire, and two general cargo vessels, the Wicklow and Inniscarra. These vessels were for the most part out of date and ill-adapted to meet the developing needs of sea transport. In particular they could not cater for the revolutionary change from general cargo to containers, nor for the emerging trend towards the roll-on/ roll-off movement of passenger cars and freight vehicles. The new board of the company in consequence found it necessary to embark on a thoroughgoing policy of modernisation, involving the acquisition of three new roll-on/roll-off passenger ferries, four container ships and a roll-on/roll-off cargo ship. In addition it was necessary to invest in new specialised berths and terminals to cater for containers and ferries, as well as to acquire a stock of containers. The capital expenditure involved amounted to over £23 million. Very nearly 80 per cent of this investment was financed by loans or longterm leases or agreements.
Following an investigation of the company in 1970 by consultants who reported that undue proportion of the B & I's capital resources was made up of loan capital, an extra £3 million share capital was taken up by the Minister for Finance under the British and Irish Steam Packet Company (Acquisition) (Amendment) Act, 1971, bringing the issued share capital of the company to £4.6 million.
Even after the raising of the issued share capital to £4.6 million, the capital structure of the company still reflected a substantial imbalance between share and loan capital. As against a total capital expenditure of over £23 million, the equity content of £4.6 million represented only 20 per cent leaving a disproportionate share of 80 per cent made up of loans and similar forms of financing.
This loan orientated capital structure is throwing an unduly heavy burden on the company by way of interest and principal payments. For example, the company achieved a net profit of £281,000 in 1974 after allowing for financial charges of £1,000,000 in that year, and will record a further surplus of £139,000 in their 1975 accounts after allowing for financial charges of £1,400,000 in that year.
The need for further share capital at this juncture was established by reports from consultants engaged at the behest of the Minister for Finance, who have undertaken a review of the company's operations and of their prospects and financial outlook up to the end of the decade. The consultants made clear that, apart from share capital needed to restore the loan/ equity balance, it was likely that a requirement would arise for substantial additional capital towards the cost of any further expansion of the scope of the company's activities, or of the replacement or renewal of the vessels of the fleet or of terminal facilities.
For these reasons I have deemed it advisable to take the opportunity to provide scope in the present legislation for meeting possible future needs of the company as well as their present requirements, and accordingly I am, with the concurrence of the Minister for Finance, seeking the agreement of the Oireachtas to empower the Minister for Finance to take up a further £15 million share capital in the company. In effect, the company's authorised share capital is being increased by this amount.
Apart from what is needed to restore a reasonable loan/equity ratio, the B & I Company will also require capital to help finance the acquisition of an additional car ferry vessel. They have, in fact, in the past week, made a formal proposal to me to order another car ferry to be built at Verolme Cork Dockyard for delivery in 1978. The matter is under active consideration at the moment in consultation with the Minister for Finance and I would hope to be in a position to make an announcement shortly. The company propose to have two vessels on the Cork/Swansea route, complementing the two operating on the Dublin/Liverpool service.
I believe that I should avail of this occasion to undertake a general review of the B & I's activities, especially in the light of the investigations recently conducted by consultants.
The company's operations come under two main heads, passenger traffic and goods traffic. Passengers— both foot passengers and motorists— and cars are carried on two carferries, the Munster and the Leinster, operating between Dublin and Liverpool, and on a third, the Innisfallen, operating between Cork and Swansea. These services are, of course, of vital importance to Irish tourism, offering as they do the most economic means of transport from our main market.
Since the introduction of the company's car ferries in 1968 their carryings have increased spectacularly, for example: passenger carryings have increased from 360,000 in 1968 to 576,000 in 1975; car carryings have increased over the same period from 43,000 to 110,000, and the number of wheeled units moved has increased from 5,157 to 27,459.
The company have maintained this growth pattern despite the effects of the Northern Ireland trouble on tourist traffic from Britain and the downturn in the Irish and British economies. In the context of an overall expansion of the market the company believe that the prospects for continued increase in the overall numbers of sea passengers are good.
The second part of the company's operations is the carriage of cargo. At the present time the B & I operate a container service from Dublin to Liverpool, as well as a weekly service to Rotterdam and Le Havre. Container services entail the use of custom-built container ships, together with elaborate terminal installations at ports. In addition, the three car ferries provide all year round capacity for the carriage of roll-on/roll-off goods traffic. About 12 months ago, the company undertook, jointly with the British firm of P and O, who provided the ship, a roll-on/roll-off cargo service between Dublin and Fleetwood.
The B & I are the major carriers of freight on the Irish Sea moving almost one million tons of freight a year between Ireland, Britain and Europe. They carry 30 per cent of all traffic on the Irish Sea and this includes exports for onward shipment to many parts of the world. They offer a truly comprehensive service catering for every customer requirement. The most significant development has been in the field of roll-on/ roll-off freight which is growing at the rate of 20 per cent per year. This trend has been accelerated since Ireland's accession to the EEC. It is significant to note in the context of the company's freight activities that their average price for moving goods has risen by only 22 per cent per ton since 1966 compared with a rise in the consumer price index of 120 per cent over the same period. In actual money terms, the average charge per ton of freight carried was £5.13 in 1966 and £6.27 at the end of 1975. When it is considered that these figures ignore the fall in the value of money over the interval, it is very obvious that the real cost of shipping a ton of freight across the Irish Sea has fallen sharply over the period.
Following the economic downturn resulting from the fuel crisis at the end of 1973 the company reorganised their services to match frequency and capacity more closely to current demands. At that time the company reduced their container operation into Liverpool from two ships to one ship and transferred traffic to the new joint service to Fleetwood which the company commenced in April, 1975, in conjunction with the P and O Company. This had the added benefit of achieving a significant degree of rationalisation of freight services on the Irish Sea and at the same time allowed the company to provide capacity for increased roll-on/roll-off freight demands.
Two special factors, one adverse and one helpful, may be noted. There is a basic imbalance between the volume of goods conveyed from Britain to Ireland, and from Ireland to Britain. The fact that there is more empty space on eastward-bound cargo ships than on westward means greater competition for traffic on the former, to the benefit, no doubt, of the Irish exporter, but at the expense of the carrier, while the imbalance of volume also militates against the most efficient use of vessels, containers, pallets and other facilities.
The more favourable factor, from the viewpoint of the B & I, is the growing trend towards roll-on/roll-off traffic at the expense of container traffic. The advantages offered by roll-on/roll-off to the customer have led him to utilise this mode increasingly, despite the higher charges levied, which are more economic to the shipowner. This development is consequently beneficial to both parties.
The B & I were acquired by the Government with the intention that it should continue to be operated as a commercial enterprise and this objective has been adhered to. The development programme undertaken by the board of directors involved the construction of new terminals at Dublin, Cork, Liverpool and Swansea; three new car ferries, the new Munster and Leinster operating Dublin-Liverpool, and the Innisfallen operating Cork-Swansea, and five new freight ships, the container vessels Wicklow, Kerry, Sligo and Kilkenny and the roll-on/ roll-off vessel Dundalk, were constructed; of these the Wicklow operates Dublin-Liverpool, and the KilKenny Dublin/Le Havre/Rotterdam, the Kerry and the Dundalk, with Irish crews are on charter abroad, and the Sligo is no longer employed by the company; new road transport fleets and a pool of 3,500 containers and trailers and extensive terminal equipment were required. Staff had to be retrained and new business obtained. Today we see the fruits of this programme:
Present turnover of the company amounts to £19 million, two-thirds of which revenue is earned abroad; it employs 1,500 people—1,200 in Ireland; its annual expenditure on goods and services in Ireland is £10 million; its expenditure at Verolme Cork Dockyard since 1969 has been £10 million; its expenditure at Liffey Dockyard since 1969 is £1.4 million.
The company have had an excellent record in the field of personnel relations. They have developed the concept of works councils in their organisation and these now form a real part of their communicating and decision-making processes. In 1975 all the employees of the company, in recognition of the difficulties likely to face the economy in 1976, agreed to defer any increase which might emerge out of any new national wage agreement for 12 months. This would represent an interest free loan to the company which would be repayable from future profits.
In retrospect it would seem to me that, having regard to the extensive scheme of modernisation which the B & I had to embark upon in the sixties, the capital resources with which it was provided by the State at the outset were far from adequate, and the company have never really been able to compensate for this initial handicap. If the company are to continue their progress, a further allocation of capital is now urgently necessary. The figure of £15 million provided for in this Bill will enable the company's loan/equity ratio to be restored to a reasonable balance and at the same time make provision for the financing of a further car ferry vessel. I should make it clear at this stage that all that is being done is that the maximum authorised share capital which the Minister for Finance is empowered to subscribe is being increased by £15 million. It is the intention that the money will actually be made available in instalments from time to time in this and future years only according as it may be required to meet the immediate needs of the company.
I recommend the Bill to the House.
