I have given permission to Deputy O'Malley to raise on the Adjournment the agreement it is proposed to make between Bord Gáis Éireann and the Dublin Gas Company and which requires Government approval.
Adjournment Debate. - Dublin Gas Company Project.
I am grateful to the Chair for allowing me to raise this matter of considerable importance on the Adjournment. The Chair referred to the agreement it is proposed to make between Bord Gáis Éireann and the Dublin Gas Company but, in fact, the agreement was made on 9 December 1982. The point of my raising the matter relates to the fact that while the agreement was made between the parties that long ago, as a result of the failure of the Government to take the necessary steps to implement it in the 11½ months that have elapsed the Dublin Gas Company have been put in a serious position. That has culminated in the last few days in the chief executive of the Dublin Gas Company writing letters to the two main contractors who are doing work for the Dublin Gas Company in connection with the conversion to natural gas and the extension to new large industrial customers.
When the Deputy sought permission to raise this matter there was one part of his question in order, the part the Chair read out. The section of his question dealing with contractors is part of the day-to-day running of the Dublin Gas Company and is not a matter over which the Minister has any control.
I will seek to demonstrate that the Minister is the cause of the letter having to be written to the two contractors in the last few days. It was an extraordinary letter because it stated that the company were not in a position to pay the contractors under the contracts. The reason the company were not in a position to pay them was that the Government have failed for 11½ months to implement the agreement, to give it final approval or sanction, to enable it to be put into effect. At the same time that the agreement was signed by the parties on 9 Decemeber 1982 I understand a further supplemental agreement was initiated on the same day by the parties. On 19 December 1982 natural gas flowed to Dublin for the first time. At that time, in accordance with the provisions and spirit of the supplemental agreement, the payment of a subsidy which amounted to about £5 million per year to the Dublin Gas Company ceased. In January 1983, again in accordance with the provisions of the supplemental agreement which the Dublin Gas Company, not unnaturally, expected to be put into force by the Government straight away, the company reduced the price of gas to their consumers of whom there are 110,000. To their amazement no effort has been made within that 11½ months to implement the agreement to make the arrangements which were arrived at in relation to the Government's shareholding in the company, in relation to their sharing in the distribution of profits, in relation to the new arrangements for the price of gas and the other matters covered in the agreement.
The consequences of this for the company have been extremely serious, particularly as far as their cash flow is concerned. The company lost £5 million straightaway due to the withdrawal of the subsidy which they welcomed at the time because they understood that the agreement would be implemented by the Government. It was part of the agreement that the subsidy would be withdrawn because the price of gas would be much lower. The company also suffered severe difficulties in that although the agreement was not implemented by the Government they had reduced the price of gas with the result that their cash flow position became serious. Their short-term borrowings in the banks have increased from their limit of £8 million to a figure in excess of £15 million. Within the last two or three days the chief executive of the company took the unprecedented step of writing to two major contractors carrying out two contracts and saying that the company cannot pay. The letter did not suggest that the contractors should stop work but that the company cannot pay because the Government will not act.
The chief executive of the company took that action because he realised what the financial situation of the company was. He realised his own potential liability if the company continued to trade in circumstances where they were unable to meet their liabilities. In writing that letter, which was unusual, he acted properly from his point of view as a director. I understand that a board meeting of the Dublin Gas Company is due to be held within a matter of days to examine the position. Of course, as the other board members become aware of what the chief executive was forced to do they will have to consider the steps they must take to ensure that they will not be personally liable if the company continue to trade. It is perfectly obvious what steps they will have to take in the absence of the Government making up their minds and honouring the agreement after 11½ months. They will have to invoke the protection of the Companies Act, 1963. We all know what that means. It will mean either an application for the appointment of a liquidator or an application for the appointment of a receiver. It seems to me that they would have no option in the circumstances but to do that.
In the meantime the whole conversion programme in Dublin has not gone ahead at any proper pace. The new large industrial consumers who were due to be connected to natural gas in the spring of 1983 have still not been connected. In fact, one of the contracts is pipe laying in connection with bringing it to them. The significance of those new industrial consumers to the Dublin Gas Company can be demonstrated when I say that one of these alone would use as much gas as is used in the entire Dublin Gas Company system.
Therefore one can imagine how vital it was and is from the point of view of the company that these matters be expedited but they were unable to implement them. The State, by common consent, is getting a good deal for little or no investment in the arrangements being made. Of course the State is giving considerable rebates and so on. But the amount of actual cash investment that had to be raised is modest, to say the least of it, when the size of the project is taken into account.
I understand that a financing package has been put together with a consortium of banks in the figure of approximately £65 million on a project financing basis to which the States's contribution is fairly small, if anything. Indeed, what the State does put up is repayable to the State by virtue of the fact that it takes the form in large part of participating preference shares, redeemable also. The State is guaranteed over a particular period of years a very large figure in dividends.
It cannot be seriously suggested that this deal is so bad that it took 11½ months to consider it, particularly when the damage being done to the company is so very obvious and great. Therefore, the position is that the company is facing the possibility of liquidation or receivership. It was with that in mind, with all the consequences for the 1,300 people directly employed and the 1,000 or so indirectly employed through contractors, the losses to industry, the losses in our balance of payments which we could have saved over the past year had this whole matter been implemented, that at 3.30 in this afternoon I gave you notice, Sir, here in the House that I intended to raise this matter on the Adjournment this evening. Lo and behold, if ever there was justification for the parliamentary institution of raising a matter on the Adjournment, the company concerned received a telephone message at 5 o'clock this afternoon telling them that after 11½ months the Government had agreed.
Therefore, in one sense, this debate here this evening is not necessary because what I wanted to achieve I achieved at 3.30 this afternoon. It is amazing that what could not be done in 11½ months was done in 90 minutes in this House this afternoon. All I have to say about what was facing the Dublin Gas Company now happily I can put in the past tense, because I believe the danger is now over. It is no thanks to that Minister sitting across there, who shilly-shallied in a most disgraceful fashion, could not make up his mind, brought in consultants to look at it, and consultants to look at the consultants, changing the mood forward, backward and sideways for 11½ months, but because I stood up here in this bench this afternoon——
I am afraid that is not the case.
——we suddenly had action and at 5 o'clock the whole thing was over. The Government had at long last approved and implemented the agreement of 9 December 1982. They did it at 5 p.m. on 30 November 1983. Had I or nobody else stood up here today we could have been another 11½ months waiting; well, we would not have been because, in that case, the Dublin Gas Company would have been gone within the next week or two.
This is the second example we have had in this House in this country within the past two weeks of the appalling danger of allowing this Government to dabble in the commercial affairs of companies. We have seen the consequences of it in County Clare. We have only just now averted the consequences of their dabbling in the commercial affairs of the Dublin Gas Company. The consequences in County Clare are very serious, not just for Clare but for the country as a whole. The consequences in Dublin would have been immensely more serious. This company is perhaps £15 million, perhaps £20 million, worse off now than they would have been had that agreement been implemented on the kind of timescale one would have expected. Also our balance of payments — in terms of the oil that had to be purchased which could have been substituted by gas during the past year in Dublin — amounts to approaching £200 million. Considering that, hopefully, we are facing a deficit of approximately £400 million, or perhaps even a bit less, in our balance of trade for this year, that figure could have been 50 per cent lower but for the silly lack of activity, this inability to make a decision, this constant questioning of everything that arose, reaching the stage at which everybody concerned was virtually driven mad by the incredible indecision and inability of the Minister to make up his mind. I suppose the matter must have gone to the Government on a number of occasions; but the Government, as a whole apparently, were equally unable to make up their minds.
This must be one of the very few times that the raising of any matter on the Adjournment, or the giving of notice in relation to it in this House, has had such an extraordinary, rapid and beneficial effect. Perhaps it is a pity in ways that we have three Adjournments only in the week. If we were to get one in 50 of them that proved as valuable as today's the country would be very well served.
Deputies
Hear, hear.
I have to disappoint Deputy O'Malley. The decision on this matter was made by the Government before I or any other member of the Government had obtained any information to the effect that he was going to raise the matter here in the House. I am sure the Deputy was quite well informed as to the day he chose to raise the matter. Obviously, he was in good contact with the people in the Dublin Gas Company, who also knew quite well the timing of the various meetings by the Government on the matter and the deadlines involved. Rather than raising the matter last week or the week before, Deputy O'Malley, from the point of view of making this wonderful statement that he has made about his massive powers of raising matters on the Adjournment, chose the day on which he raised it with consummate political care without any great regard to the effect he would achieve by so doing. I can tell him that the decision was taken by the Government without the knowledge at all that we were going to have the benefit of Deputy O'Malley's oratorical peregrinations on the subject——
When did they take the decision?
——at this rather advanced hour of the evening. If I may, I can tell the House that his matter has been before the Government on a number of occasions. It was discussed at length yesterday and again today.
(Interruptions.)
I said the matter was decided today. There is no contest about that matter. What I said, however, was that it was decided before we know of Deputy O'Malley's apparent parliamentary interest in the matter.
Was it before or after 3.30 p.m.?
I am surprised, a Cheann Comhairle. Indeed, having listened patiently to the presentation that Deputy O'Malley made of this issue, without interrupting him, to inform him of the situation——
What time did the Government meeting finish on it?
I hope Deputy O'Malley will allow me to complete my remarks in the same good-humoured tone in which he approached the subject himself without interruption from him, although I am delighted to see him here.
Why did they not get a telephone call this morning?
(Interruptions.)
Order, please. This is a confined debate.
Deputy Barrett (Clare) tells me that the Minister for Agriculture could not leave until after 4 o'clock.
I implore you, Sir, not to allow my colleague from Meath to interrupt, because, I would feel bound to answer Deputy Fitzsimons if he were to interrupt me. I do not wish to be put off my track in this matter at all.
This is what is called the "laugh-it-off" technique.
The position is that I am rather surprised, Sir, that Deputy O'Malley, whom I recollect here in the House when we were discussing the Electricity Supply Board recently, talking about his concern about projects and saying that the worst decision he had made in his political life — and I do not believe he made too many bad decisions — the worst one he believed he made was when he failed to stop a project because he was told it had gone too far. I do not propose to make the same mistake that Deputy O'Malley so honestly accused himself of making in the particular instance to which he was referring. I want to make it absolutely clear that this project involves very substantial capital investment. This Dublin Gas Company project will be the largest ever capital project being undertaken in the gasfield in this country. It will be perhaps the largest single initiative that will have taken place here in this decade, with the exception of the Money-point generating station.
I am sure Deputy O'Malley and the entire House would agree with me — Deputy O'Malley in more reflective moments than those through which he now appears to be passing — that the Government and the Minister should have examined all of this properly. Deputy O'Malley rather blithely suggested that there was no Government involvement of any consequence in this, that there were only some minor rebates in prices given which did not really matter. In fact the rebates being given are very substantial. In the initial stages of the project, the Government will be getting a price from Dublin Gas which will represent a very valuable national asset, namely natural gas. The price to the gas company will be much smaller than the price to other people. Failing to obtain a price for a valuable product which is in scarce and limited supply, namely natural gas, is the same as giving a subsidy or a grant. There is no real difference. The difference is only in the way in which it is expressed.
The State investment in this project is very large. The company are quoted on the Stock Exchange with a value of not more than £1.2 million, yet that very small company, in terms of its capital base, are carrying out a massive capital investment project with very little equity. It is a very highly geared project in the sense that the company have a large amount of debt, a large amount of investment and a very small equity base. Therefore, any deviation up or down on the projected performance of this company could have disproportionately large results in terms of losses for the company in a way that would not happen if this was a highly geared project with a large equity base. If there were to be any deviation from the projected sales target it would become known very soon.
To be viable, this project must provide a sevenfold increase in the volume of gas sold in Dublin. Therefore, the Government were right, considering they are putting a very substantial amount of money into this project, to ask whether the project or plan is capable of increasing sales sevenfold. If it does not achieve that——
(Clare): Somebody has to take the gas.
If the company do not achieve this projected increase they, and the State which is involved so very heavily, will have to face serious financial difficulties. Therefore, it is right from every point of view that the Government should examine this matter properly so that they will be satisfied they are making the right decision. The decision of the previous Government, to which Deputy O'Malley referred, was taken on 9 December by a Government who had been rejected by the people, a Government who were on the way out. They rushed into taking this decision: information about the decision was only conveyed to the gas company on the day when the present Government took office. In such circumstances — I do not suggest there was anything unusual about that — it was appropriate that the new Government should examine this matter properly. We have done that. We have done it well and have come to the right decision. In his more reflective moments I am sure Deputy O'Malley will come to see that we were right in adopting the approach we did.
I thank Deputy O'Malley for giving me the opportunity of avoiding the ire of his esteemed leader who has been complaining in the House about Ministers making announcements outside the House.