Dáil Éireann debate -
Wednesday, 18 Dec 1985

Vol. 362 No. 14

Irish Steel Limited (Amendment) Bill, 1985: Committee and Final Stages.

Section 1 agreed to.

SECTION 2.

Question proposed: "That section 2 stand part of the Bill."

Mr. Lyons

We mentioned in the Second Stage debate the possibility of venture capital or equity coming into the company. Is section 2 so drafted as to provide for that? I am raising it at this time to ensure that provision is made for that. The table to the section provides that:

2. Notwithstanding anything contained in the Companies Acts or in the memorandum or articles of association of the Company, the share capital of the Company shall be £125,000,000 divided into shares of one pound each and the Company shall have power, with the consent of the Minister for Finance, to divide the shares in the capital of the Company into several classes and to attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions.

The explanatory memorandum states that the share capital of the company under present legislation is £120 million which has been taken up by the Minister for Finance and then it goes on to mention the statutory borrowings. I am talking about the possibility of venture capital being included. Is it covered in this section? Is it provided for in this section or at all in the Bill? I did not wish to wait until we got to the last section to ask that question in case we had by-passed the relevant section and at some stage the eventuality could occur. The Minister has indicated that it is not covered in section 2. Arising from that, would the Minister indicate to the House how it is proposed to accommodate possible venture capital in the company?

Minister for Industry, Trade, Commerce and Tourism (Mr. J. Bruton)

This section does not provide for the investment of equity by an outsider in the company as it stands. It would be somewhat premature to make such a provision at this stage as we do not know the form which such an equity injuction might take or its conditions. I expect that this could be aproached either by examining the memorandum and articles of association or possibly by a revaluation of the existing share capital of this Minister for Finance to allow a share to be allocated to the other owner within the overall limit of £125 million. The possibility, however, of a joint venture involving an allocation of equity to a new partner would, as I said to the House, require some form of amending legislation.

Mr. Lyons

I want the Minister to confirm that if private interest or venture capital is available it will require further legislation to accommodate it. Let me ask——

Mr. J. Bruton

Probably. Let me interrupt the Deputy. To be quite honest, we have not gone into the details of that because at the moment we are simply looking for a venture partner and we have not got one and the chances of getting one are uncertain. Therefore, we have not worked out the precise legal instruments that would be used.

Mr. Lyons

Yesterday, in his Second Stage speech, the Minister indicated that the chairman of the board had done a great deal of travelling and talked to many people about the possibility of venture involvement by an outside body or person. It seems extraordinary, if the chairman of the board is hunting the marketplace for possible venture capital investment in Irish Steel, that we have not set down the ground rules for such an eventuality. In very simple, ordinary layman's terms, that is putting the cart before the horse. It is tantamount to saying that we will search out and travel the country and other countries and contact various people and financial institutions and, if there is a possibility of an interest being expressed by some group or person in becoming involved financially in Irish Steel, we will sit down and draw up the regulations and, if necessary, as the Minister said, introduce a Bill.

I find that extraordinary. Last week the legislation establishing the NDC passed through the House and I should like to know if that is a vehicle by which possible venture capital could be accommodated. If we had an indication of possible involvement by somebody I would not like to be the Minister, official or chairman of the board that would say to any such person or group, "You have indicated your interest in Irish Steel, which we welcome, but I will have to go back to the Oireachtas and have legislation put through the House so that you may contribute or become involved in the venture." Will the Minister indicate if the NDC legislation will accommodate such an occurrence? It would be regrettable if a person who was interested in the financial structure of Irish Steel could not get involved or negotiations were delayed to such an extent that he was prompted to remark "You are not ready; you are not geared up." In such a case we might lose venture capital.

Mr. J. Bruton

The position is quite the opposite to that envisaged by the Deputy.

Mr. Lyons

I am glad to hear that.

Mr. J. Bruton

If we were to introduce detailed legal provisions in regard to a joint venture it might occur that the provisions made would be quite unsuitable to the particular type of joint venture available. Then, having passed the legislation, we would have to remove it and tell the people concerned that we were sorry that the sort of idea they had was not the type of idea we thought they might come up with and before we could finalise the deal we would have to amend the legislation.

In fact, what happens in the cases like this is that, firstly, there is a sounding out of interests on the part of a wide range of companies. That is what is going on at the moment and that is all. Then one or two — probably only one of them — would pass to the point of serious discussion. Once the nature of their interest is evident in general terms what would then be drafted, and approved by the Government, would be a negotiating brief which would set out in detail the terms which the Government would be looking for. It would obviously be inappropriate to start setting out the terms at this stage when we do not know what is essentially on offer. Until we know what is on offer and who is offering it, we do not know what their capacity is to meet our requirements. If, for instance, the only offer that is available is a very modest one but we still wanted to accept it, it would be foolish to set very severe terms. If, on the other hand, we had a whole range of offers available and we could pick and choose between them, it would be appropriate to set more severe terms. But to come along before we have started to talk seriously to anybody and set down immutable terms in Statute before we have a full picture as to whether an offer was available and the nature of it, would, to my mind, be an imprudent approach.

I said that it was possible or probable that legislation, or at least some form of assent by the House, would be necessary to a joint venture; but that does not necessarily have to mean the joint venture partner taking shares in, for example, Irish Steel. It could be done by means of a holding company operation or the establishment of an operating company in which the said partner would have a share. That could be done probably within the ambit of normal company law operations. In that position legislation as such might not be necessary; but, obviously, a discussion in the Dáil would probably be appropriate so that the House would be aware of and consent to what is being done.

I hope those points convince the Deputy that the approach we are adopting is a prudent one. I should like to point out to him that, although there has been a great deal of work done and a large number of companies have been approached, all that has been achieved so far is a substantial amount of exploratory work, the giving of information to possible partners with a view to their coming back either immediately or at a later stage to have either discussions or onsite investigations of the plant.

Mr. Lyons

When I asked the question if the possible involvement of venture capital in the company was accommodated I did not indicate, and I am not indicating now, that we should have minute details. I did not want the hands of the chairman tied in his efforts. I agree with the Minister that it would be an incorrect approach to have minute details set out in the Bill. I would object to such a stranglehold on anybody who is trying to negotiate, and that is far from what I have in mind. If the Minister is satisfied that the chairman of the board is not inhibited in any way in his efforts — I hope he proves successful — I am satisfied.

The Minister has indicated that if we reach that stage legislation can be introduced in the House giving details of any such agreement. The Minister did not answer the question I posed: if the NDC would accommodate such venture capital? There is a good deal of reference in the Bill, and in the Minister's speech, to venture capital with the NDC.

Mr. J. Bruton

No. If the National Development Corporation were to invest in this, that would be further State aid, and that is not on. I do not expect that the holding company provisions of the Bill dealing with the NDC will be used in the case of Irish Steel. As the House agreed last week, it is important that the NDC be a forward-looking venture body looking for new opportunities, not weighed down with the responsibilities for existing companies in the mature phase of their operations. Obviously, any arrangements that would be made would be made separately for Irish Steel without any involvement of the NDC. It is important that the NDC be not looked upon as a port of last resort for those who are looking for money. If it is to work properly, it should not be seen as a rescue body or as a palliative for problems in particular localities, as some people said in their contributions about the NDC and with which I do not agree. The NDC must be forward looking, seeking new opportunities, without any political, regional or social constraints.

Mr. Lyons

While I have no wish to debate the National Development Corporation Bill again, it is very interesting when related to Irish Steel. The NDC Bill spoke about "investment", "encouragement", "involvement", "situations that were profitable or likely to become so" and/or "the creation of viable employment". Would the Minister acknowledge that practically all the State or semi-State bodies referred to in the First and Second Schedules of the NDC Bill were possible areas in which the NDC could become involved? A week later we find that, if Irish Steel were in a position to be likely to provide viable employment, or to be in a growth area, the NDC could not become involved. This is one of the companies proving themselves to be viable.

Mr. J. Bruton

They have not proved themselves to be so.

Mr. Lyons

Is the Minister satisfied at this stage that Irish Steel are now, or in the long term are likely to be, a viable undertaking? If that is so, why may the NDC not become involved? We have read in the NDC Bill that the successful enterprises in which they would be involved would be disposed of if profitable, and those which were not profitable would be retained. On inquiring about equity and venture capital for Irish Steel, we are now told that the NDC either cannot, will not, may not, shall not — whichever it is — become involved.

Mr. J. Bruton

The Deputy has not been listening too closely to what I have been saying.

An Ceann Comhairle

The Deputy cannot debate the National Development Corporation in this debate and that is for certain.

Mr. Lyons

That is quite so, but I am making the point that venture capital should be available or be likely to be available for Irish Steel as a further encouragement to their viability, the maintenance of existing jobs and the hoped for possibility of the creation of further jobs. We could arrive at a situation where those who had lost their jobs in Irish Steel and had not found employment because of none being available to them might be re-employed there. If Irish Steel become the success we all hope they will become. The Minister appears to be very doubtful about it.

Mr. J. Bruton

I wonder if I might interrupt the Deputy in order to help him.

Mr. Lyons

I would be delighted to hear the Minister.

An Ceann Comhairle

The Chair would like to point out that section 2 simply provides for an increase in the share capital of Irish Steel Holdings Limited, and the amending principal Act. That is all the section does.

Question put and agreed to.

Sections 3 to 5, inclusive, agreed to.

SECTION 6.

Question proposed: "That section 6 stand part of the Bill."

Mr. Lyons

This is just the short title and citation, but could I ask the Minister is he satisfied that the company are now, or in his opinion in the long term will become, a viable undertaking.

Mr. J. Bruton

I think they will become a viable operation. The evidence of recent months suggests that they are heading in the right direction, whereas previously they were heading very markedly in the wrong direction. However, their success henceforth will depend on the joint action of workers, board and management. They will no longer be able to have resourse, under EC rules, to State aid, whether from the Government, the National Development Corporation, or any other source which the Deputy might think up.

Question put and agreed to.

Title agreed to.

Bill reported without amendment and passed.