Dáil Éireann debate -
Tuesday, 3 Nov 1987

Vol. 374 No. 9

Nítrigin Éireann Teoranta Bill, 1987: Second Stage.

Minister for Industry and Commerce (Mr. Reynolds)

I move: "That the Bill be now read a Second Time."

The purpose of the Bill is to increase Nítrigin Éireann Teoranta's facility to borrow under ministerial guarantee from the existing level of £150 million to £180 million.

I will now outline the background which gave rise to the necessity for this legislation.

NET was incorporated in 1961 with a nominal share capital of £100 and with ministerial power to guarantee up to £1 million in borrowings. Through a number of subsequent legislative Acts the authorised share capital was increased to 77.5 million shares of £1 each. All the authorised share capital has been issued and all the shares are beneficially held by the Minister for Finance, except for one each held by the 12 directors. Similarly, successive legislative Acts have increased the Minister's power to guarantee NET's borrowings up to a limit of £150 million. This facility is currently fully utilised.

Mr. Keating

On a point of order, I wonder if the Minister will circulate copies of his script?

Mr. J. Bruton

Hear, hear.

Mr. Reynolds

They are around there somewhere.

Mr. J. Bruton

They are not around here.

Mr. Reynolds

We will get them to you in a moment. NET was formed for the purpose of manufacturing nitrogenous fertilisers and the company commenced production at its plant in Arklow in 1965. The chief products were ammonium sulphate and the fertiliser, calcium ammonium nitrate, both of which were based on ammonia which in turn was produced from heavy fuel oil. Then the discovery of the natural gas field off the Kinsale Head offered NET the opportunity of using an attractive feedstock for the manufacture of ammonia. At the beginning of 1974, NET received an allocation of gas from the field and at the end of that year with Government approval they commissioned Kellogg to build a worldscale ammonia and UREA plant at Marino Point, Cork, with annual capacities of 435,000 tonnes of ammonia and 310,000 tonnes of UREA. However, as Deputies are only too well aware, major problems were incurred in the construction of the plant which resulted in its construction being delayed by 17 months. The final cost of the Marino Point plant was £137.3 million, an increase of 116 per cent on the first detailed estimate of £63.5 million.

This cost overrun, coupled with net trading losses, placed the company in extreme financial difficulties resulting in the State having to inject £50 million in extra share capital in 1981. This share capital is, of course, included in the issued share capital of £77.5 million to which I have already referred. Despite this capital injection, NET did not immediately move into profit. It lost £12.2 million in 1982 and £25.3 million in 1983. However, it made a profit of £2.9 million in 1984 and £4.8 million in 1985. These profits were significant results as they were achieved after the servicing of the company's heavy debt burden.

Unfortunately, this trend did not continue. The company lost £19.5 million in 1986 and lost about £14 million to end September 1987, by which time its total debt was £180 million. In fact, 1986 was a most difficult and unrewarding year for the fertiliser manufacturing industry and all European producers suffered losses due to a slump in world prices which resulted from cheap imports into the European market.

The ongoing losses, combined with difficult trading conditions in Europe, compelled the senior management of NET, following a review of NET's strategic position, to conclude and recommend that an association with a major fertiliser producer was necessary to ensure the long-term viability of the company. Their review identified Richardson's Fertilisers Ltd., Belfast, a wholly owned subsidiary of Imperial Chemical Industries plc, as the most suitable partner.

The strategic need for an association with a major fertiliser producer arose because NET's prospects in the medium term were uncertain. The company's debt placed an enormous strain on its cost base and on its ability to develop or survive. There seemed little prospect of NET making any significant reduction in its debt in the medium term. It was quite obvious that unless some significant remedial action was taken NET's ongoing losses could not be sustained and that these would place in serious doubt the very future of the company with a possible total loss of employment. This currently amounts to 615 people of whom 301 are in Arklow, 277 in Cork and 37 in Dublin and other locations. It was against this background and the belief that a strong native manufacturing fertiliser industry was of strategic importance to any agricultural country, that the Government decided that discussions should be opened with ICI aimed at creating a joint venture company involving NET and RFL. In January of this year the Government approved the joint venture arrangements which had been agreed in principle following lengthy, detailed and complex negotiations.

Under the joint venture arrangement the business of NET has been merged with that of RFL to form a new company, Irish Fertiliser Industries Ltd., to service the fertiliser markets in the Thirty-two Counties of Ireland. NET at present manufactures straight nitrogenous fertilisers at Marino Point, Cork and Calcium Ammonium Nitrate at Arklow. Both of these products are based on ammonia which is produced in Cork. By contrast, RFL — which employs approximately 340 people — manufactures a compound fertiliser at its factory in Belfast. The new company will, therefore, be able to supply its customers with a broad range of fertilisers through its own production and also, of course, if desirable, by trading with other suppliers. It will also supply the Richardsons plant in Belfast with ammonia about equal in quantity to that imported by Richardsons from the United Kingdom at present. This ammonia has been surplus to NET's requirements and by its transfer to Belfast the necessity to sell it on the open market at whatever price it could obtain will be removed. The company also intends to produce and sell intermediate products and by-products of its fertiliser manufacture. It will also sell on foreign markets products surplus to the requirements of the home territory. It is the company's intention to establish and maintain a competitive cost base and a strong distribution/sales system throughout the country and to utilise, wherever possible, indigenous raw materials, services and labour. It shall also be open to the company to develop further investment opportunities, which in the opinion of the board can be separately and economically justified.

The structure of the joint venture provides that Irish Fertiliser Industries will be a subsidiary owned 51 per cent by NET and 49 per cent by ICI. NET will, of course, continue to be a 100 per cent State owned company. NET has retained its gas contract with Bord Gáis Éireann. It will sell the gas purchased under this contract to IFI at a price which has been subject to detailed commercial negotiations between the Government, NET and ICI to ensure that it is a market related arms length price. Through the sale of the gas NET will obtain a profit and this, plus its share of the dividends of IFI, will be used by it to service its debts. These debts now stand at approximately £160 million following the transfer down to IFI of about £20 million of NET's debts in respect of working capital.

I must stress that the joint venture was never envisaged in terms of asset sales. It was negotiated as a pooling of resources to create a stronger indigenous fertiliser company. The financial terms were structured to ensure that the returns to the two parties would be commensurate with their relative earnings contributions. From NET's point of view this has been achieved through a fully commercial gas price coupled with 51 per cent of the dividends from IFI. On this basis, approximately 75 per cent of the profits of IFI will come to the Irish State and 25 per cent to ICI.

This latter company which is a world leader in the technology of ammonia production will contribute to IFI through the input of Richardsons and its technical expertise in ammonia production. It will also contribute through its purchasing and marketing facilities and through the sheer size of its presence in the international market place.

As I have already indicated NET had heavy losses over the past two years. These losses have been funded largely through short term borrowings which were due for repayment in the near future. With the implementation of the joint venture the opportunity was taken of putting these borrowings on a longer term footing and also to provide some additional facilities. In addition, as I have already indicated, NET has £150 million of guaranteed borrowings.

When approving of the joint venture in January 1987 the Government decided that if possible the additional medium-long term funding should be obtained from the banks on an unguaranteed basis, but that if the funding were not available on terms acceptable to the Minister for Industry and Commerce and the Minister for Finance the Government would introduce legislation to guarantee the required borrowings. Following this decision, discussions took place with a number of banks and while offers to provide the funding on an unguaranteed basis were received, the terms attaching thereto were not acceptable. Consequently, the Government decided to introduce legislation to guarantee the additional borrowings required, that is £30 million. The banks were notified of the decision and, in anticipation of the introduction of this legislation, they provided the funding on terms acceptable to myself and to the Minister for Finance. Medium and long term facilities of £30 million have been arranged on acceptable terms, replacing NET's existing short term borrowings and providing the company with a contingency margin during the initial, transitional period of the joint venture in what remain unpredictable market conditions.

The provision of these facilities cleared the way for the establishment of the joint venture which was put in place on 9 October last.

I must emphasise that NET's financial position was and is quite serious and that the joint venture will not of itself necessarily provide sufficient money to service the debts. A company which lost £34 million over the past 21 months will not produce significant profits for its parent Irish company immediately after joining with a profitable company in Belfast. It must be pointed out that NET will be very exposed to movements in oil prices and to exchange rates because of the gas price formula and it will also be exposed to changes in interest charges. For example, an increase of 1 per cent in interest rates would cost NET £1.6 million per annum. Also if oil prices slump it could result in NET getting a reduced return from IFI. Hence, the need to provide a hedge for NET to allow it scope to service its debts over the first year or so of IFI's operations. However, the joint venture will create a stronger more viable operational company better able than an independent NET to meet the fierce competitive pressures existing in the fertiliser industry. I am confident that through its price and dividend payments to NET the joint venture company will contribute much more significantly to servicing the debt than NET could if it had remained an independent company.

Nevertheless, it will take a tremendous effort on behalf of all concerned plus a significant improvement in the international fertiliser industry and related markets if the debt is to be serviced out of the moneys to be received by NET and without recourse to Exchequer support. In this regard, it should be noted that it will be the responsibility of NET to monitor the performance of IFI on behalf of the State and to keep the Government and this House informed as to its progress and the contribution it is making towards the servicing of NET's debts. In addition the accounts of IFI will be incorporated into the annual accounts of NET, which company as I have already stated will remain 100 per cent State owned, and will therefore be subject to Government and Dáil scrutiny as at present.

I am confident that the Nitrígin Éireann Teoranta Bill will commend itself to the Dáil. I recommend the Bill for approval.

Mr. J. Bruton

The previous Government decided in January that the additional borrowing necessary for NET would be undertaken on normal commercial terms without the benefit of a State guarantee. That is the appropriate fashion in which any commercial enterprise should raise money because in that way the company must not only convince the Government and their own board of directors but also the banks whose money is at risk, of the wisdom of the investment. By changing their minds and agreeing that a State guarantee would be given, the Government have essentially absolved the banks of their responsibility in so far as vetting the project is concerned, in that they are going to be repaid whether or not the project succeeds. They therefore do not have to exercise their critical faculty as bankers and are not at risk.

The Minister gave no information as to why the Government decided to finance this deal on a guaranteed basis, that is, with a Government guarantee rather than on the originally envisaged unguaranteed basis, beyond saying that discussions took place with a number of banks and that where offers to provide funding on an unguaranteed basis were received — the banks offered to fund this deal on an unguaranteed basis — the terms attaching thereto were not acceptable. What was unacceptable about them? That is the key question. If these terms were acceptable we would not need this Bill. I hope the Government did not take a short term decision and decide that because the terms of, perhaps, the rate of interest were finer on a guaranteed basis they would prefer to go for a guaranteed loan because it would improve the cashflow of the company in the short term rather than go for an unguaranteed normal commercial loan because the risks are high in the event of that guarantee being called in. I expect that the savings in the case of a guaranteed loan are not very considerable. That is at the heart of this whole debate. We would not need this debate if the Government decided otherwise. Since this is the whole core of the debate, the Minister rather surprisingly has not explained, beyond the words "not acceptable," why he did not opt for a normal commercial loan to finance this deal which, in the event of failure, would leave the banks at risk rather than further expose the companies, the Government and the taxpayer to the vagaries of the fertiliser market.

As the Minister has said, the situation with regard to Irish Fertiliser Industries is extremely serious. He said: "I must emphasise that NET's financial position was and is quite serious and that the joint venture will not of itself necessarily provide sufficient money to service the debts." If that is so, why give a guarantee on the £30 million when funds were offered on an unguaranteed basis? That is the $64,000 question or even the £180 million question to which we have not had an answer from the Minister but I am sure we will get a reply before the debate concludes. The Minister will understand that we will need to probe somewhat more deeply into this matter.

At the end of September 1987 the Minister told us that the debt of the old NET was in the region of £180 million. How much of that debt is being transferred to the new NET and how much of it will remain with Irish Fertiliser Industries? Is it the case that the new NET is taking over, not just the capital debt but also the working capital debt? If they are not taking over the working capital debt can the Minister tell us how much of the debt is represented by working capital and how much of it is represented by long term debt? The reason I ask that question is to lead on to the following one: do we really need to guarantee £180 million at all? Could we not get away, for example, with simply giving them a guarantee for, let us say, £165 million?

I presume that a considerable portion of the debt is related to working capital. If the working capital debt is remaining with Irish Fertiliser Industries and there is no question of guaranteeing that — we are only guaranteeing the debts of NET, the new holding company — and if the debts of the new holding company are only going to be £180 million minus the working capital, say, £20 million, £30 million, £15 million or whatever, surely one could get away with giving a guarantee to NET of a lesser sum than the £180 million debt, only part of which will remain with the holding company.

Those are the essential questions I want to put to the Minister about the Bill as it comes before us in the form of two rather brief sections. I question whether we need to have this Bill at all as the money could, and perhaps should, be borrowed on an unguaranteed basis. I question also whether we need a debt of £180 million. Could we not do with less since it is probable that NET will only be taking over the capital and not the working capital debts of the old company?

I have another question. The Minister told us that the company lost £19.5 million in 1986 and about £14 million to the end of September 1987. This would seem to suggest that they are heading for a loss in the whole of 1987 at least as large as the debt in 1986. Would I be correct in saying that that is so, or has there been an improvement in their trading position in the latter half of this year which would tend to improve the situation in the last four months of the year? What are the prognostications? What is the Minister's forecast of the likely profit and loss situation in 1988, first in regard to NET, the holding company, and second in regard to Irish Fertiliser Industries in which the holding company will be the majority shareholder? We need to have the best available estimate that the Minister can give for both of those for next year before we can come to a judgment about the wisdom of giving the guarantee on behalf of the taxpayer which would otherwise have to be met by the banks. It would be normal in the context of his previous capacity as managing director that the Minister when going before the board would not just provide historic information but would give the best available information at least 12 months ahead as to what he expected to happen. I know that the fertiliser business is inherently hazardous and can be affected by a change in, for instance, the purchasing policy of the Chinese Government or the blowing up an ammonia pipeline somewhere east of the Urals which can totally throw world price off the rails. Two such events, in China and in the Soviet Union, happened in the last two years and caused these tremendous losses. Neither the Minister nor his predecessors could have control over these events. I have no wish to cause difficulty for the Minister but, before we agree to this, we are entitled to that information, that is, reasonable profit forecasts.

I know also that it is a requirement for State companies generally to produce a five year rolling corporate plan. Have Irish Fertiliser Industries provided the net holding company and the Minister with such a plan? I do not ask the Minister to reveal the details to the House because I realise that this could be commercially sensitive information affecting the competitiveness of the company but the House should be at least assured that the Minister has such a plan in his possession so that we can know that the same disciplines apply to this company in its new mixed ownership as applied in its previous holding State-owned status.

Having said that, it is my firm conviction that, in so far as one can be reasonably certain about things of this nature, the joint venture with ICI and Richardsons is the best route forward for this company. There has been a tremendous shakeout in the fertiliser market worldwide in recent times. The number of stand alone fertiliser manufacturers in Europe has been shaken down in the last three years or so to about one third of the number of companies that existed three years ago. There has been a rash of mergers and closures of companies in this area as a result of market pressures. Companies are seeking safety in size in order to maintain their competitive position. For a small one nation nitrogenous fertiliser industry to survive, as NET with its two plants in Arklow and Cork had to do, it was essential that it get involved in a joint venture with a larger organisation so that it would have the financial and market muscle and the availability of the research and development of the large ICI combine in regard to new product opportunities. The balanced range of products that this joint venture gives NET is also an important reason for its going ahead. Prior to the merger NET were producing straight nitrogen, either calcium ammonium nitrate or urea and nothing else. It was only able therefore to provide a portion of the farmer's fertiliser needs. It was not able to develop a brand image as the fertiliser company that could provide all the farmer's needs. It was not involved in providing compounds containing phosphate and potassium. Now, through its link with Richardsons which is involved in producing compounds, NET will be able to offer a much wider and more commercially defensible range of fertilisers. This is very welcome. When this deal was mooted about three years ago I was involved as Minister for Industry and Commerce and, right from the beginning, I have been strongly enthusiastic about the prospect of NET getting involved in a joint venture of this kind. I feel that NET was on the road to extinction on its own. It is now on the best possible road towards survival and growth.

There are a number of points of detail to which I should like to refer. Can the Minister give us some information on the remuneration levels of directors of NET as compared with those of directors of Irish Fertiliser Industries? As I understand it, the NET directors will receive for their work a level of remuneration which is extremely parsimonious and is related to the failure of successive Governments to adjust the fees of non-executive directors upwards in line with their responsibilities. I believe that Irish Fertiliser Industries being only partially State-owned — 51 per cent — will not be subject to the same controls on the remuneration of either the managing director or the ordinary directors. How will these levels of remuneration vary? This was something with which I tried, not successfully, to deal when in Government. There is a need to review the levels of remuneration of part-time directors of State companies, which should not necessitate the sale of 49 per cent of the shares of the company to create the conditions in which such a revision can take place.

Can the Minister give me an estimate as to when he expects the debt inherited or retained by NET to be extinguished under the arrangements that are being made? As I understand it, Irish Fertiliser Industries will pay a dividend on any profit they make and that, of course, will go towards the reduction of the debt of NET which we are now guaranteeing to an even further extent but the main contribution towards the extinction of this debt will come from the profit that NET will make on the gas they sell to Irish Fertiliser Industries. NET have a contract in regard to gas which must rate as one of the best contracts in the world in the sense that they are paying probably 4p or 5p per therm when the going price is somewhere in the thirties. I understand from what the Minister says that Irish Fertiliser Industries will be paying a commercial price. Could I tempt the Minister to tell the House what that price is? Either he or his guardian angel will know whether he should resist that temptation. This would be useful public information.

Mr. Keating

He is under an obligation to give it.

Mr. J. Bruton

There is a very large difference between what Irish Fertiliser industries are paying to NET and what NET are paying to Marathon. It is that difference and the amount that flows which will determine when, if ever, the debt will be paid off and when, if ever, the guarantee we are now being asked to give will be extinct or diminished. For us to know whether the guarantee we are giving is a wise one we need to know more about the likely profits that NET will be making annually on the sale of gas to Irish Fertiliser Industries. We need to know the price, as Deputy Keating interjected. I was perhaps being unduly easy on the Minister, having sat in his position and having perhaps too much sympathy for the problems with which he has to cope. It is legitimate information that the House should have; otherwise we shall not be able to come to a judgment as to how long it will take for the debt to be extinguished.

There is another question to which I should like to advert. I understand that the worker directors who were previously in NET will remain but that they will not be worker directors of Irish Fertiliser Industries. This is a matter which may be raised by some Deputies during this debate. The system of worker directors in State companies has not worked as it should have done. I understand that in some companies — and I have reason to believe that NET were one of them — the worker directors, in fact, became fulltime directors. They were almost like local politicians rather than people who were working on the shop floor and who had reasonable time off to attend meetings and prepare for them.

Mr. Keating

That might explain a lot.

Mr. J. Bruton

That was not a good practice. There are problems of direct conflict of interest between worker directors of a State Company and the interests of the company in negotiating wage increases. If the board of directors have the job of examining a claim for a pay increase for members of their staff, obviously they are getting involved in an industrial relations negotiation in which tactics will have to be discussed. If worker directors are sitting in on the board of directors, hearing what management tactics will be and rushing around to advise the union the next day of what management are going to say to them at the next stage of wage negotiations, that will hamper matters. Usually it is not just a matter as simple as wage negotiations, changes in working practices and matters of that kind may be involved where clearly much important work has to be done. It is an inherently unsatisfactory situation involving a conflict of interest.

The solution is to go for the German system where there is a supervisory board who do not get involved in day-to-day management matters as a normal board of directors do, to which the working board report and that the workers' representatives would be on the supervisory board but not on the actual working board. This, in fact, is what is going to happen in this case, in that the workers will be on the supervisory, or holding company board, of NET but not on that of Irish Fertiliser Industries and that is welcome. Again, it is a change that should be made on its own merits without waiting for a joint venture prospect to come forward. Would the Minister consider that a change of this kind to a supervisory board and a working board would be an appropriate solution in respect of other companies in which he is involved?

When I was Minister for Industry and Commerce, I suggested that shares in Irish Steel should be made available on reasonably good terms to the workers in Irish Steel and that the Minister should dilute his shareholding with a view to allowing the workers to become shareholders in the company. That was in the context of a possible joint venture operation which I believe is the best way forward for the survival of Irish Steel, giving that company the type of strength in the market that NET now have. I regret that is not the case in this deal for shares in Irish Fertiliser Industries to be given to any of the employees. I ask the Minister to discuss that matter with both Irish Fertiliser Industries and NET as part of a long term strategy for the company. Once the main deal is put in place on a 51:49 basis it is possible that shareholding could be made available to the workers of NET also. That would be a useful development. The prospect of a capital gain arising from the added value of the company as a result of their own efforts would be a valuable motivation for the workforce.

I have another concern on the future of the company and on which I seek information from the Minister. I understand that the European Community introduced recently an import duty on nitrogenous fertiliser, a common Community tariff in regard to imports of fertilisers to the Community. It appears that this duty will be sufficient to keep low cost fertilisers from eastern Europe out of the European market and in the process make things a little easier for the Community's fertiliser manufacturers and a little more expensive for the Community's farmers. However, I understand also that one of the principles of the GATT is that there should be a standstill and roll back of duties. In other words, there should be a standstill on new duties and a roll back of the existing duties which were initiated four or five years ago. I cannot remember the exact date.

One of the key elements in the GATT negotiations is that all new or recently introduced duties should be rolled back. What are the prospects that the protective tariff which is being introduced to protect the European fertiliser market would be rolled back as part of the GATT negotiations and if it is rolled back what would that do for the prospective profitability of Irish Fertiliser Industries? If it does ill to the prospective profitability of Irish Fertiliser Industries what is the likelihood of the guarantee we are agreeing to here being called into play? We need to know a little more about the prospects of the European fertiliser market in matters such as its interaction with the GATT before we can satisfy ourselves that there is no danger to this guarantee.

I understand that the company have been producing good quality and good volumes of fertiliser from their plants in recent times and that the problems they face are due to the market rather than to any internal difficulties. I am very glad to say that the managment in Irish Fertiliser Industries and their workforce are cooperating fully to make the present venture work. An atmosphere of realism, which is necessary, obtains in NET at this time. It is fair to say, and this is only an historical exercise, that some unwise decisions were made in regard to the building of Marino Point. I am conscious that that decision was made by a Government of which I was a junior member but that should not prevent one from learning from experience. At that time new technology was being introduced whereby gas which was produced as a by-product of oil production and which until then had been flared off and wasted could be harnessed for the production of nitrogenous fertiliser. At the very time that technology was being introduced, when a new production facility was coming on to the market, this State decided to produce nitrogenous fertiliser from natural gas. This natural gas could have been used for any number of other purposes. In other words, we went into the market at a time when a whole range of new alternative, competitive and much cheaper production facilities were coming on to the market. Of course, the prospects were bad.

The new plant at Marino Point was the first plant ever built by Kellog and Company, the contractors. Of course, anyone doing anything for the first time is likely to learn from their mistakes and that is fine if they are paying for the mistakes but in this case the mistakes were being paid for by the taxpayer. There are definite lessons to be learned from the mistakes which have been made. We are not engaged in so many large projects at this time that the lessons are of daily applicability but we need to take note of them just the same.

I would like to avail of this opportunity also to ask the Minister, as he is the Minister responsible for prices too, what are the prospects for an increase in the price of fertiliser charged to farmers for both this and next season. Am I to understand that NET are likely to increase their prices considerably in the near future? I have been so advised. To what extent will these increases be due to the tariff I referred to earlier on? Essentially, those are the points I wanted to make. I welcome the NET-ICI deal. It is the right way forward for the company and I welcome the fact that we have an opportunity of debating it in this House. We could of course have debated it by way of an ordinary motion. We did not have to introduce a Bill giving a further State guarantee to £30 million in order to have a debate on the subject. I have serious doubts as to whether this additional State guarantee on top of the present guarantee of £150 million by the taxpayer is necessary at all and nothing that the Minister has said so far has allayed those queries and concerns.

Mr. Keating

Similarly we, in this party, are very unconvinced by the Minister's introductory remarks. Indeed, we go somewhat further; we feel obliged to oppose the Bill and to give a clear reason for so doing.

While this proposal appears superficial to some extent, in the sense that what it is doing is changing, or allowing to be changed, the liability the Minister can incur on behalf of this company, it affords us a useful opportunity to discuss more fundamental issues. Those basic principles would lead us to redress and reassess fundamentally the role and involvement of the State in underpinning NET any longer. From its very foundation this company has been, is now and without any shadow of doubt will continue to be a very substantial drain on very scarce taxpayers' money without any clear idea from anyone — in fact all the indications are to the contrary — that, at some point, it will become profitable in its own right and ultimately get off the backs of taxpayers. That is not what is being presented to us today. There is no suggestion that that will happen.

Accordingly, we must ask ourselves some basic questions: what precisely is the role of the State in relation to NET in 1987? For example, I wonder whether or not the basic premise, which is, that a factory of this nature producing, for strategic purposes, an essential requirement of the agricultural sector of our economy, is as relevant any longer as it was when it was the well-intentioned design of those who drafted the first proposal. The world has changed substantially since then. I have no doubt whatever that if we were starting from a green field base — if the House will pardon the very bad pun — any Minister coming in here today suggesting that a company be funded to the extent of £180 million worth of State guarantees would be thrown out by this House unceremoniously. Unfortunately, what has happened is that the longer this has continued the stickier it has become. I regret to have to say that the overriding characteristic of this company, of the various debates which have attended its fluctuating financial fortunes, has been that every undertaking, promise, indicator, every restructuring, every suggestion that tomorrow would be a better day has simply not come true.

We are now in the position perhaps of throwing good money after bad. That may be a bit harsh because I am aware that the joint venture proposal, the endeavours of genuine employees in the workforce, of management, all those who want to see things go right are well intentioned, that they are all working towards an ultimate outcome which would be successful. But, we must ask ourselves the basic question: will it be successful? We have grave doubts. We do not think that the problem is any longer one of supply. We do not think the essential requirement should be for the State to ensure that it has within its shores the capacity to supply the marketplace. Basically the problem is demand. In a world economy, bearing in mind the small role we play in that, it is simply not essentially economic for a State or economy of this size to have its production capacity in this respect with the kind of economic drain it makes on our resources. Whatever way one wants to gild the lily, the essence of this request today is to provide another £30 million of scarce resources to continue to prop up a company which, unfortunately, regrettably and very sadly has, since its foundation, managed to under-achieve in terms of every target it set itself. I know there are reasons for some of that, excuses which are entertainable, but that is the bottom line. Yet, day after day, Deputies come into this House seeking the allocation of scarce resources to very needy areas or problems. We are told the money is not there. We know the money is not there. If I had a spare £30 million and I had to take the decision as to where that money would go I have not the slightest doubt that I and everybody else in this House would find many higher priorities than allocating that sum of money in this manner today. That is what is at the bottom of it.

I honestly believe that someone in this House has to say that by any reasonable standard time has run out for NET, that they have been encouraged, wheedled, invested in and restructured by successive Administrations representing various sides of this House and that it has not worked.

A brief look at the history of the company will testify to that. It was with some slight sense of bemusement I reverted to the Official Report of 23 January 1963 when the Nítrigin Éireann Teoranta Bill, 1962 was being introduced in this House by the then Minister for Industry and Commerce, latterly Taoiseach, Deputy Jack Lynch. He said, at column 215:

I consider it desirable to stress the fact that all moneys advanced to the company will be repayable with interest, on the lines of advances made to the Electricity Supply Board and Bord na Móna. There will be no grant or subsidy assistance for this industry and there will be no tariff or quota protection in any shape or form.

He said a lot of other things too but what it boiled down to — all those years ago — was that the State was underpinning for a short period of time by means of loans which would be repayable. Not merely have they not been repaid but subsequently the disastrous Marino Point project, which was the subject of a comprehensive report from the Joint Committee on State-Sponsored Bodies, their 13th Report produced on 16 December 1980, unfortunately painted a most depressing picture. Here I might quote from page 59 of that report, paragraph 102:

The continuing decline in the Company's situation is of serious concern to the Committee. It is clear that under its present structure the Company's activities are totally uneconomic and it is incapable of meeting its loan commitments. Expected cash losses, loan repayments and working capital requirements cannot be met without further injections of cash either by way of permanent capital or increased borrowings. The Committee is of the opinion that further borrowings should not be resorted to since they serve only to aggravate the situation further through increased interest charges and foreign exchange risk which the Company does not have the capacity to service.

Paragraph 103 of the same report reads:

The Company maintains that continued support by the Government can be justified on purely economic grounds and has submitted to the Committee its strategy for survival, the successful implementation of which, the Company argues, would enable NET to break even in 1984-85...

And the elements of that are listed. The House can judge for itself whether those elements have been implemented. They include the shut-down of uneconomic activities, a programme of productivity improvement, an increase in sales prices, where possible, an injection of £80 million equity by the Government and so on. We had that tortured debate all during that period.

In the debate in 1981, similar in nature to this one, when it was proposed that the guarantees available from the Government would be increased the House was told by various speakers including Deputy Des O'Malley, then Minister, who introduced the Bill — and here I quote from column 2631 of the Official Report of 12 May 1981:

NET's accumulated losses at the end of 1979 amounted to £24 million and the loss for 1980 is expected to be £56 million. The total amount of NET's medium and short-term borrowings at the end of 1980 was over £200 million, with associated annual financing charges of £30 million.

Later in the same column, Deputy O'Malley had this to say:

The Government have concluded that the immediate financial difficulties facing NET must be tackled now and the specific purpose of the present Bill is to enable the £80 million bridging loan to be repaid by 29 May 1981 and to provide formal guarantees for the existing unguaranteed medium-term loans of £50 million. Failure to tackle these problems at this juncture would, in my opinion, inevitably precipitate the immediate closure of the company.

Therefore, under threat of possible closure of the company, the House agreed. Later the then Minister indicated the kind of restructuring then required. We can judge for ourselves whether or not that happened. On that occasion Deputy O'Toole said — and I quote from column 2634 of the Official Report of 12 May 1981:

This company have had problems from the very beginning and one cannot but look back at the question of their building, their construction, the contracts handed out at the time, the information on which the board at that time worked which was given to them by their advisers.....

Deputy O'Toole was talking then about the disastrous and incredible Marino Point project for which unquestionably heads, if not any other part of the anatomy, should have rolled.

But as is the way with public expenditure on gas, nobody pays the price except the suffering and silent taxpayer.

Deputy Barry Desmond said in the same debate as reported at column 2638:

It has been estimated that NET will lose about £31 million this year. We are in the fifth month and this figure has not been denied. Last year they lost £50 million. If NET had been paying the normal commercial rate for their feedstock last year..... the loss would have been £80 million,.....

And so on. I will not quote other Deputies who spoke then but a whole succession of Deputies told NET that we wanted to do right by them, we wanted to give them a chance and not to be begrudging; we wanted to encourage employment in the area. For example, Deputy Deasy said at column 2661, and I understand his plea:

Could the money we are being asked to agree to here today be spent better in the building of hospitals or in the provision of employment or by way of grant-aid for industry and for farmers? We must ask ourselves whether this money might be put to more productive use. We must also ask whether the gas might be used in a more productive manner.

Deputy Peter Barry said at the time as reported at column 2659:

What happened in the past so far as this plant is concerned is both regrettable and appalling. The report of the Joint Committee was alarming.

An Ceann Comhairle

Deputy, is it necessary to quote at some length a variety of Deputies from a previous debate? The Deputy should make his own speech.

Mr. Keating

I have every intention of doing that. It is germane to what we are talking about here today to paint in the background to this Bill, which is an echo of other Bills which at previous times stitched into the record of this House clear expectations by Deputies from all sides, including the Minister's party, that there was a bottom to the well and that NET, or any other organisation presumably, could not continue to expect to get handouts from the Exchequer unless they performed. I am asking today whether the time has at last run out and whether we should say that we are sorry, we are giving no more guarantees, that £150 million worth of commitment, apart from the other subsidies which NET receive, is adequate. That is the view of my party and it is important to get that point of view across. This is not a new suggestion. This attitude is inevitable and it mirrors accurately the aspirations and the reasonable, civilised approach of Deputies over the years. I do not think it reasonable for the Minister to come in here today and ask for more money, particularly when in his speech he suggested that it was possible for the banks to have taken up that guarantee but that for reasons they did not do so. I have no doubt that the reasons they did not are the same as those which inhibited the Deputies I have mentioned and quoted in their enthusiasm about NET during the years.

Nobody has put a price on the energy subsidy, for example, for NET yet we find an incredibly creative, fanciful type of approach in NET now going to make a profit from selling on gas which they get at knock-down price, courtesy of the taxpayer, to another company with whom they are now in joint venture. That is doing it by mirrors and is less than honest. Those supplies are sold on with a profit based on a cost to NET which is subsidised by the taxpayer. That can hardly be deemed a step on the road to profitability. That is creative accountancy of the highest order and can only result in artificially cocooning NET and the taxpayer in some kind of Disneyland from which it is impossible to extract the facts.

The joint venture with ICI, if it yields results, is welcome but I notice that ICI were clever enough. Quite rightly, they did not take on the accumulated liabilities, and they would be mad to do so. Nowhere in what the Minister said is there a hint that there is in this suggestion of proposed additional guarantees the hope that the company will at last become self-financing or profitable. On the contrary, every such commitment, every such promise has been broken all down the years. The Minister said that the banks had been somewhat less than enthusiastic about rushing in here, despite the underpinning by the Government. In passing let me say that it is about time that this House took on the banks, particularly in terms of the disgraceful role which some banks play in manipulating the economy of this small country to their own advantage. When the full story of the H. William debacle comes to be written that case will be further evidence in that respect. In this case the banks are involved but, be assured, be it a financial disaster or a nuclear holocaust, the banks will come out all right. Whatever about the workers, suppliers, creditors, taxpayers or the Revenue Commissioners, the banks will get their moneys. I would like to see at some stage in the near future a thorough and rigorous examination in this House of the role of the banks in the economy. In this case I want the Minister to develop that aspect of what he said to us today.

He talked about how the Government decided not to take up the option which appeared to be available to them and instead to propose what is in front of us today. He said that when approving of the joint venture in January the Government decided that if possible the additional medium/long term funding should be obtained from the banks on an unguaranteed basis, but if the funding were not available on terms acceptable to the Minister for Industry and Commerce and the Minister for Finance the Government would introduce legislation to guarantee the required borrowings. I do not know if that second part was known to the banks when the Government went looking for the money. If we say to the banks, "Please can we have unguaranteed moneys? By the way, if you are not going to guarantee them it is OK because we are going to introduce a Bill anyway." It is reasonably predictable what the answer will be.

Following this decision discussions took place, the Minister says, with a number of banks and, while offers to provide the funding on an unguaranteed basis were received, the terms attaching there to were not acceptable. Why? What precisely were the criteria on which the Minister decided not to take up the offer of unguaranteed funding? Was it because the banks' demands were too great, that they wanted some form of equity shareholding or too big an interest return or what? Wherever possible this House should avoid adding to the burden on taxpayers at present and this is one case where it appeared there was an option. Perhaps the Minister was quite right and maybe the terms which the banks demanded were too great but, why did the Minister decide not to take up that option? It boils down to the fact that a burden is falling now on those who cannot afford to pay it and they are the ordinary PAYE workers who will not benefit at all from this £30 million any more than they did from the previous £150 million.

The Minister indicated that there is no cause for optimism. He said that medium and long term facilities and the £30 million have been arranged on acceptable terms — acceptable, presumably, to him — replacing NET's existing short term borrowings and providing the company with a contingency margin through the initial transitional period of the joint venture in what remain unpredictable market conditions. Just in case we doubt what he said, he went on to emphasise that NET's financial position was and is quite serious. It will continue to be so because nowhere in this proposal, either in the Bill or in the Minister's speech, are terms and conditions demanded of NET which will make them perform or ensure that they comply with reasonable commercial criteria. If that means that we have to take on over-manning or urgent restructuring, then it should be done. There is no more importance to be attached to a job in NET than there is to a job in my constituency or in any part of the Public Service. It is not that one job is more important than another because those jobs are being paid for by you and me. It is time that someone said, "Enough is enough".

Everywhere in the Minister's speech there is more of the same. Compare the text today with the text of the last occasion and there are echoes. The language in some cases is the same. I do not know if the workforce were in place then but certainly the drafter is the same or else is the son or daughter of the person who set it up in the beginning. The same kind of language is used, the same easy option, the same appeal to the centre, the same running in front of the problem instead of taking it on and saying, "Gentlemen, you can get it this time but you will not get it again; these are the conditions and if you do not comply the guarantee does not stand." I and my party colleagues will approve of this Bill only if there are explicit terms and guarantees attaching to that £30 million which will ensure by any reasonable commercial criteria that NET become selfsustaining and self-financing.

A careful look at the joint venture which the Minister talks about or hints about as being the beginning of turning the corner will reveal that that is not the case. I am not clear as to what precisely is the interaction between the two companies, although the Minister talks about 51 per cent/49 per cent ownership stakes. Presumably the liability which NET has incurred to date will remain exclusively NET'S and is to be paid off from the profits made on the spurious sale of gas to IFI. Does the Minister expect that NET will become self-financing at any time in the future? He referred in his speech to the fact that NET had heavy losses over the past two years, funded largely through short term borrowings which are due for repayment in the near future. What control do the Department exercise on the incurring of such debts? What letters of comfort are issued? What is the total liability of NET to the State, including the full costs of all guarantees, subsidies and grants, direct and indirect? My suspicion is that due to a lack of willingness on our part to take on this problem we are spending enormous sums of money to sustain the unsustainable and to defend the indefensible.

I am sorry to be so negative about this matter. One has to have a great deal of sympathy with the workers, particularly in these days when work is so scarce.

Our priority and obligation must be to all workers, not to workers in any sheltered area. The 615 people who currently work for NET in Arklow, Cork and Dublin need every possible consideration. It might be more honest to suggest, however, that over the next five years that workforce might be reorientated in the direction of some other industry, perhaps related to food production or agriculture. I see no future for this company and the evidence of the past 26 years littered throughout the Dáil debates bears me out. It gives me no solace or comfort to say so. It would be a lot easier to say the opposite and perhaps a lot more politic too, if I were to be cute about it. The basic point my party believe is that people are sick of cute politics and that we must call a spade a spade.

I know a lot of people who have no work. They have no work because many of us in this House refused to face up to groups who were strong or in positions of relative power. If we had £30 million here to spare, where would we apply it? I doubt that it would be in this particular area. It is in the context of our obligations to all workers, particularly unemployed workers, that we raise our objection.

The Bill before us is identical in spirit and almost in letter to a number of other previous measures. The Marino Point project was referred to by Deputy Bruton. It was a debacle, but that was not surprising. My insights gained over the past three or four years working on a Committee of this House indicate that whenever the State gets involved in this kind of project it usually makes a mess of it. I find it incredible that people will come in here, having apparently done feasibility studies, and tell people what is going to happen — but then it does not happen and will never happen. I can take no comfort from the one or two positive notes sounded by the Minister today. He said that the company lost £19.5 million in 1986 and about £14 million to the end of September 1987, by which time the total debt was £108 million. I do not believe those figures take into account the subsidies I referred to earlier in relation to energy and soon. l am convinced that the total liability of the company in real terms is in excess of £200 million. This Bill asks us to allow that debt to increase without any type of conditions or guarantees accompanying it. It would be irresponsible of us to agree. I know there is a down side to it but unfortunately there is always a down side when one tries to do the right thing.

The Minister spoke about the joint venture company being able to supply their customers with a broad range of fertilisers. The problem is not the supply; it is demand and economies of scale. There are other companies in Europe who can supply what this company supply but at a cheaper rate. That is the real difficulty. There is no way of overcoming it. It is no reflection on the company or the workers involved. The Minister said that ammonia has been surplus to NET'S requirements and that by its transfer to Belfast the necessity to sell it on the open market at whatever price it could obtain would be removed. That is another example of an organisation locking itself into a preset arrangement which may work to its advantage in the short term. The market place is ultimately where money is made and profitability arises. It is not made in tied arrangements which will always have a lower common denomination than the higher potential rewards available in the open market place. The joint venture will work predominantly to the advantage of ICI because it allows for a good trading arrangement by them, without incurring the liabilities of NET.

The problem still remains that NET, with their huge debt, are looking for more money today as they have done every few years since they were founded, and there is not a shred of evidence to suggest that this will be the last time. It might be better to say "no" now than in two or three years' time when the bill will be £250 million or £300 million. Inevitably and inextricably that is the route this company are going. I hope I am wrong but I cannot see any other way forward because of the evidence of the past. Guarantees were given by company directors and executives, by Ministers in this House and by trade unionists involved but all these have been put aside. On that evidence we rest our case. We do so with no sense of pleasure or jubilation. It is a tragic and difficult situation. The overriding tragedy is for those who have lost severely already, who are disemployed, unemployed and disadvantaged because this State has spent recklessly and irresponsibly money which it did not have instead of saying "no" in areas like this where it should have been said. This kind of attitude will continue to exacerbate the unemployment problem generally, though it may solve a temporary problem locally for a few. The majority of the people and the unemployed will pay the full cost of what is proposed if this Bill is approved.

Mr. Spring

A discussion is long overdue as to the factual situation of NET and the contents of the merger or joint venture proposed between NET and the Belfast company. I am not sure if what is before us is the correct method of bringing about that discussion. It is very necessary for us to have a detailed discussion but I regret that the Minister's speech left more unsaid than said regarding the basis of negotiations with Richardsons and the agreement that has been arrived at and in relation to the breakdown between the NET holding company and the new company, IFI. I hope the Minister will endeavour to clarify the many issues to which he has not referred, either in his closing speech or on Committee Stage.

I am glad this is not a take-over, or an attempt at privatising a certain State company, but the fact that the subsidiary will be 51 per cent owned by NET and 49 per cent by ICI should be acceptable, and NET continues to be 100 per cent owned by the State. It is difficult to comment in detail on the financial aspects of this agreement because we have not been supplied with an adequate amount of information. It is incumbent on the Minister to do this on Committee Stage but if he does not we will be pursuing him during Questions.

There are many answers which need to be given about the negotiations, the basis of those negotiations and the detailed minutiae of the agreement between NET and Richardsons. The Minister should outline in detail the negotiations which took place with the banks. As I said earlier, I am not sure if it was necessary to guarantee this £30 million. If the future of this company is being put on a sound or reasonably sound commercial basis, the banks should have been in a position to agree loans which did not have to be guaranteed by the State.

I would like the Minister to outline the basis on which the loans have been granted and the details of those loans. It is important for the House to see the attitude being taken by the banks in negotiating a loan of this size. It would be of interest to see if the banks are treating the State, through a State company, in a reasonable manner but it would appear, since the Minister had to come before this House, that the banks are not treating the company in a reasonable manner. This is not something which is completely unknown to us because, as has already been pointed out, the banks will always adopt the attitude to protect themselves, irrespective of the taxpayer or anybody else. Admittedly that is their responsibility, but it is important that we have all the details before us to debate this matter. It would also be interesting for the House to be informed of the exact details of this loan — the rate of repayment, the terms of the loan, any guarantees or form of guarantees which have been given and so on.

I am particularly concerned about certain aspects of industrial democracy and what the future holds in relation to worker directors and the workforce generally. It is all very fine for speakers to come into this House and point the finger at the workforce or at the weaknesses in having worker directors on the board, but I do not believe it is all one-way traffic. In my view, comments like that arise from the outdated concepts to which we cling, the worst of the concepts we inherited from across the water, as regards the relationship between management and workers. It is high time we decided to do things the Irish way and not follow the old management techniques we inherited from colonial Britain. As long as we hold on to those outdated and outmoded concepts of bad industrial relations between management and worker it will not bode well for the development of Irish industry.

I am very anxious that we have active participation by worker directors in the new company. Many questions remain unresolved and many questions still remain to be asked. Deputy Bruton came into this House and complained about the role being played by worker directors, the amount of time they are given and the fact that they will be seen to represent workers at board level. I wonder if, for example, he would have any objection to members of the Beet Growers' Association being on the board of the Sugar Company? Who will they represent? Will they influence the price of beet? It is natural for worker directors to represent the workers in these companies, and, Gods knows, there are times when these workers need representation. Perhaps, on Committee Stage, the Minister would clarify the role to be played by these worker directors.

As I said, we have less rather than more information as a result of the Minister's speech. Perhaps in his concluding speech he might tell us if there is a development plan for this new company, If so, will he outline in some detail what is that plan? We are very aware of the fluctuations which can affect the sales, marketing and pricing of this company, as well as the fluctuations in currencies and the price of oil. If there is a development plan, we should be told about it because it would be something on which we could base our judgments as regards the wisdom of guaranteeing the borrowings for which the Minister is seeking sanction.

We would also like further details on the technical aspects of the plant. For example, will there be an upgrading of the ammonia storage facilities and the Prill Tower in Arklow which has been talked about for many years? I should like to know if the present management of NET will be part of the new deal. I also want to know about the workforce. Have we arrived at a position where there will be no further redundancies either in Arklow or Marino Point? It is of vital importance that the workers be informed of these matters before any further progress takes place.

As regards the marketing department proposals which have been discussed by the company in recent months, will the new company, IFI be reviewing those proposals and if so, when that review will conclude? Over the years there has been mention of a study to develop IFI as a fertiliser chemical industry. Are there any prospects for further industries or spin-off industries under the new package? If so, perhaps the Minister will let us know.

I believe it is very important that we and the workforce in NET are informed of IFI's proposals in relation to worker democracy. The concept of worker democracy is long overdue. Workers are entitled to more information about company balance sheets and marketing and pricing policies than they have access to at present. If we are to have the co-operation of the workforce, then the directors and managment will have to be far more open when dealing with their workers because with greater access to information there will be a better understanding of the difficulties being faced by the company. I assume that that will lead to better co-operation in areas where co-operation may have been withheld in the past. Will the Minister say if there will be worker director elections to the NET holding board after the next election? Will the Irish nominees to the board of IFI be responsible to the holding board of NET? What proposals have been put in place to ensure that NET'S substantial investment in IFI is regularly and critically reviewed? Obviously, responsibility will ultimately rest with the House but I should like to know if there will be a procedure through which we can review this on an ongoing basis.

In the past trade union representatives have been appointed to the board of NET and I should like to know if the Minister has considered appointing a trade union representative to the new board because such appointees will be in a position to make a substantial contribution. Many questions arise in relation to the general conditions of workers in the NET plant and many questions remain to be answered concerning the comprehensive agreement. I should like to ask the Minister to tell the House if that agreement will be adhered to. Will continuity of service be guaranteed? Will there be a role for the Department of Finance? What procedures will be invoked in regard to ministerial input into IFI? As this is a joint venture I should like to know if it will be necessary to invoke different departmental and ministerial procedures for communications and directions to the new company.

Will the Minister say if existing agreements with workers will be altered? It is of vital importance that the Minister give us details of the management structure of the new company. He should also give us details about the scholarship and apprenticeship schemes that have been in existence for many years. Will those schemes be continued? I am seeking replies to those questions because it is important that the joint venture should start off on the right footing. I do not think that the methods adopted by the board of management of the old company were satisfactory in regard to the position of worker directors. In my view worker directors did not have access to the information they were entitled to under the Companies Act. On many occasions management steamrolled worker directors when they sought access to information.

It is important that worker directors are given access to all information. The new company is starting out with many difficulties, including debt and world wide marketing, and if it is to pull through there will have to be 110 per cent effort by management and workers. That will not happen if there is any prevarication by management when it comes to giving worker directors access to information. It is in the interests of the company that worker directors be fully briefed and that their assistance is sought to deal with the many difficulties the new company will face. The Minister should give consideration to what has happened in regard to the appointments at board level and to the appointment of a managing director of the new holding company. He should assure the House that everything has been done in accordance with the provisions of the Companies Act.

The Minister should clarify the position of the banks in regard to this. I hope there was not a conflict of interest between those who negotiated this deal on behalf of the IFI board and the banks. The banks have cushioned themselves in regard to future fluctuations by virtue of the State guarantee. One has to accept that a joint venture was the best way forward for NET. There were many difficulties in the past but they were not brought about by the action of the workforce and it is important that that is kept in mind when we are addressing the question of industrial democracy or workers' rights in the new company. I hope the Minister will respond to the points I have raised when we are on Committee Stage. Those matters have been taken up with the new management and it is important that the Minister responds to them before the House gives him the authority he is seeking.

We must remember that we are being asked to guarantee borrowing to the tune of £30 million at a time when it is not easy to come by that amount of money. We must be satisfied as to the future prospects of the company and the protection of workers who have made enormous efforts since the company ran into difficulties some years ago. The Minister should ensure that management co-operate in permitting workers to participate at all levels of decision making, as they are entitled to. Their participation should be welcomed. It is important that we shake off the outdated and outmoded concepts of management-worker relationships, the worst of which we have inherited from across the water. Without that effort the new company will face many difficulties. The company will be involved in a very competitive world market having to deal with under pricing from the Far East in particular. I hope the Minister can tell us that the workforce will be given a fair crack of the whip. That is all they have asked for and they are entitled to it.

Mr. Jacob

I welcome the opportunity to make a brief contribution on this Bill. I see it as a recognition of Nítrigin Éireann Teoranta's genuine efforts to restore order to its finances and general operations as a result of a major rationalisation programme which is almost complete. When NET was the subject of debate in both Houses, criticism of its performance was deemed appropriate but perhaps the overriding thing was the over-expenditure in the construction of its Marino Point complex. That criticism still applies.

I was amazed at Deputy Keating's holier-than-thou attitude in relation to the over-expenditure. The Deputy queried the wisdom of the Minister's approval and wondered why the State should guarantee cost overruns by this company. In whose period of office did the finances of NET run out of control? Deputy Keating will remember that it was in the period of office of his party. My searches through the records of these debates have failed to uncover any favourable or positive comments but I assure the House that there are favourable and positive aspects to this company.

NET was set up by the Government in 1961 as a private limited company so as to establish a nitrogenous fertiliser industry here. It was conceived that this homebased industry would provide nitrogenous fertilisers to supply our premier industry, agriculture, thus removing our dependence on imported products. The company's original factory went into production at Arklow in 1965, the initial two fertiliser products being ammonium sulphate and calcium ammonium nitrate. They subsequently constructed a plant at Arklow for the production of complete concentrated fertilisers and a range of NPK products was made available to the farmer. Contrary to the impression given I by Deputy Bruton when he spoke, NET provided a full range of products. Perhaps that was one of the errors of the company — going for such a wide range of products. However, NET, satisfied virtually every single small requirement of the farmer. They even embarked on the hazardous production of borinated products for the beet industry. They concentrated on a range of products for the export market. Non-fertiliser products such as sulphuric acids, nitric acids, liquid C02 and dry ice were also produced and distributed on the home market.

In 1975 the Government approved the construction of an ammonia and urea plan at Marino Point in Cork and production there commenced in 1979. Ammonia, as well as being used for the production of urea in Cork and calcium ammonium nitrate at Arklow was sold on the export market. NET in its lifetime of little over 20 years has pioneered and perfected sophisticated distribution and handling systems at factory, at depot and at farm level, and after over two decades of intense research and development, NET have lifted the fertiliser industry on to a new plane. Having worked closely with CIE on the development of transport and distribution, the industry now has a network of storage depots strategically placed at railheads throughout the country. This results in the farmer being facilitated not only with a sure supply but with supply at a standard price regardless of distance from production plants. Custom-built rail wagons capable of carrying 40 tonnes of bagged products on pallets provides as sophisticated a delivery service as can be found anywhere in the world. In conjunction with State agencies such as ACOT and An Foras Taluntais, major research and development activities have resulted in a quality product being available to the farmer either in bagged, bulk or liquid form.

All of these activities have provided tremendous added-value to the economy as a whole in terms of providing large scale spin-off industry and employment. Concerns such as CIE, private hauliers, shipping agents, dockers, sawmills, pallet manufacturers, engineering suppliers, plastic manufacturers, plastic bag manufacturers and many more have benefited directly from NET.

NET has been a great friend to the farmers in that they have been assured of the vital element of nitrogenous fertiliser. NET have never let the farmers down. One season in the late seventies when industrial problems were rampant there was a curtailment of calcium ammonium nitrate production at Arklow. The company responded by importing a massive 240,000 tonnes of bagged product over a very short period. They shipped this tonnage into this country through a dozen ports around our coasts and this was fed into the distribution network to service the Irish farmers in good time for the season.

Had NET never been established, agriculture today could not count on an assured supply of nitrogen. Rather, we would be totally at the mercy of foreign manufacturers. Today NET employs 600 people having peaked at one stage with a workforce of 1,500. Having shed all of its non-profitable operations, it is now an efficient sophisticated annual producer of 512,000 tonnes of calcium ammonium nitrate, 490,000 tonnes of ammonia and 365,000 tonnes of urea. It also supplies for the soft drinks industry 15,000 tonnes of liquid CO2.

The Minister by introducing this Bill has recognised the merit of this company and the important role they play in the industrial and agricultural sectors. The Minister wishes to go forward rather than backward. He wishes to concentrate on this type of company to see what we can do for the nationally important sectors such as the agricultural industry. I compliment the Minister on his forward thinking approach to this matter. With their fusing with ICI and the Richardson concern in Belfast on a 51-49 per cent basis, this company can go on to better things. I wish the newly moulded firm, Irish Fertiliser Industries Limited, the very best for the future. Regardless of the negative approach taken by Deputy Keating earlier in the day, I think we will be sitting here in a couple of year's time with a different viewpoint. The Minister is adopting a positive approach to this matter rather than the negative approaches that were taken in the past.

I would like to make one final plea to the Minister. The streamlining of NET at Arklow, while setting the company on a viable footing, has had serious economic implications for the town and hinterland. The reduction of the workforce has meant job losses of sizeable proportions both directly and indirectly and the area is now in critical circumstances. The adjacent town of Wicklow, in the aftermath of the Veha debacle, is also economically crippled and the western area of the county has also witnessed a significant increase in unemployment. I urgently make this plea, that the Minister consider a temporary designation order under section 6 of the Industrial Development Act, 1969, in respect of these areas of County Wicklow. This designation instrument has proven successful in other areas and perhaps it could now be used to breed new industrial and economic life into this ultra-depressed region of County Wicklow.

Tomás Mac Giolla

It is a pleasure to hear the positive aspects of the NET operation as outlined by the Deputy after listening to the dreadful, doleful and typically negative attitude of Deputy Michael Keating who did not have a good word to say about NET. I am glad Deputy Keating is opposing this deal. I am opposing it, too, but for totally different reasons. Although he did not give a positive affirmation of the intentions of the PDs in regard to NET, it seemed he was complaining about this deal because we did not entrust the whole company to ICI. We are only giving them 49 per cent of it.

Mr. J. Bruton

I do not think that is what he said.

Tomás Mac Giolla

He seemed to say that the State should not hold any portion of NET, in other words we should give the whole company to ICI.

The word "privatisation" has not been used by anybody in this debate so far. Is this our first privatised company? The Minister will say, no, that the State are retaining overall control of the holding company but it seems that this is our first step towards privatisation of this company. There is now a demand for an extra £30 million loan facility for NET while at the same time we are told that the privatisation element should eliminate the need for further loans. The whole purpose of private enterprise coming into the State sector is to inject capital and to ensure that the State does not have to inject further money. We are now discussing a Bill which will increase the borrowings of NET from £150 million to £180 million, an increase of £30 million.

Deputy Keating's attitude was that NET'S losses should be added to because of the subsidised price at which they are getting gas. It is not subsidised. They are getting it at a lower price from the multinational company, Marathon Petroleum Ireland Limited. Does he want them to charge NET more for the gas?

Mr. J. Bruton

Who does the gas belong to?

Tomás Mac Giolla

Unfortunately, Marathon got about a quarter of the seas in the area for £500 back in the fifties under a Fianna Fáil Government so it is Marathon who own the gas although the State should own it. Deputy Keating seemed to say that NET are getting a subsidy in this area. They have not got any loans or grants from the State apart from the £50 million equity in the late seventies. If we are to consider Deputy Keating's argument it is an argument which should be considered within the context of every manufacturing company, taking into account all the loans, grants, subsidies, tax reliefs and so on which the private sector gets. The manner in which Deputy Keating spoke about NET — and this is the typical attitude of the PDs — was that by virtue of the fact that they are a State trading company they must be bad, that there must be something wrong with them that they could not possibly be up to the standard of the private sector companies which are all going to the wall in debt and are looking for loans, grants and subsidies from Fóir Teoranta, the IDA and other Stage agencies. He seemed to imply that there is nothing wrong with giving them money, that they are private sector companies and must be efficient. That is not the right word to use to describe them. They may make money but in most cases it is through ripping off people, as can be seen quite frequently. Unfortunately, this was the fate of NET from the very outset.

Kellog, the multinational construction company, ripped them off to the extent, as is indicated in the Minister's speech, that the quantified costs were set at £65 million but eventually they had to pay in excess of £137 million. From then on this enormous debt was wrapped around the necks of NET, leaving them in an impossible position from day one of having to pay back that debt with interest. The management of the company were brought to task about that matter. In 1974 the trade unions called for a public inquiry in regard to the manner in which management allowed the Kellog construction company to rip them off and to escalate costs to 116 per cent.

In case one would think that the private sector company would do better, let us compare Alcan which is a combination of three multinational companies whom one would say would be highly efficient in this regard. Unfortunately, the construction companies were able to rip them off to almost exactly the same extent because Alcan's original costs were £326 million and the final costs were about £620 million. That was a cost escalation of 90 per cent; the cost escalation for NET was 116 per cent. Alcan was run by three multinational companies; they had a cost escalation of 90 per cent and were also 12 months behind schedule; the NET project was 15 months behind schedule. NET were ripped off but so were private sector multinational companies ripped off by other private sector construction companies. That does not excuse in any way NET allowing those costs to escalate and allowing themselves to be ripped off in that manner but it does show that they are no worse and no better than the multinationals.

Despite the huge debt which they were given from day one, NET, year after year from 1971, increased their trading profits and eventually moved into profitability in 1984 with £2.9 million and £4.8 million in 1985. Those profits were made after paying off interest charges and repayment of debt of over £23 million and £25 million in those years. In other words, in 1982 there was a trading profit of £32.9 million, almost £33 million, and in 1983 there was a trading profit of £25 million. In 1984 there was a trading profit of £42 million. They ended up with only £2.9 million profit because they had to, and did, reduce the debt by paying off capital and paying off the interest charges of approximately £23 million. In 1985 they had a trading profit of £30 million. In that year they made a profit of £4.8 million.

As the Minister said, 1986 was a disastrous year for fertiliser companies all over Europe because of cheap imports. In that year, while they had been moving rapidly forward into profitability each year, in 1986, as a result of this problem in the fertiliser industry in Europe, they lost £19.5 million. The Minister said that this loss of profits in 1986 of £19.5 million compelled — and that is the word the Minister used — senior management of NET to conclude that an association with a major fertiliser producer was necessary. They were compelled by the losses in 1986 to look at an association with a major fertiliser producer. If one is acting under compulsion one is not in the best position to make a deal. Presumably the compulsions were added to by pressures from Government and Ministers, from the media and whoever else. Under compulsion they went into this deal. The question then is, did they get a good deal or were they, once again, ripped off as they had been in the original construction of the company? I believe they did not get a good deal because the end result is that NET, the holding company, 100 per cent State-owned, are also the holding company for the whole of the debt. One hundred per cent of the debt is held by the State and the Minister has not given us any indication of what assets the company holds. But they do hold all of this enormous debt of £180 million and they must repay this. The obligation is on NET, a State company, to repay all of this £180 million. At the same time, they set up a production company of which NET holds 51 per cent and Richardsons of Belfast, a subsidiary of ICI, get 49 per cent. That production company has no debts whatsoever.

Mr. J. Bruton

We do not know that.

Tomás Mac Giolla

They are in a totally new position. If NET had been in this position from the beginning they would have been making fantastic profits every year; they would never have made a loss, except one year. This production company, IFI, has no debt. Deputy Bruton quite rightly made the point that we need to know the profits this company will be making. To see whether we got a good deal or ICI got the best of the deal, we need to look at the trading profits NET have been making over the years. If they had been making these profits and did not have to pay interest and capital off their debt, how much profit would they have had? On that basis this new company should be making a very substantial profit each year. Perhaps what Deputy Bruton means is that we should watch their accounting systems because, as we ought to know by now from association with many other multinational companies, they never show a profit in their accounts. They can manage this by paying amounts into other subsidiary companies of their own and thus show a loss in the company that is reporting to us here in Ireland while the profits are going to some of their subsidiaries. We are well aware of how that can be done and profits covered up. We need to know their profits; we need to know their accounting system; we need to know the share we are getting and the share that ICI are getting.

I cannot understand how a Minister can come in here and ask us to approve a deal of giving Richardsons 49 per cent of this company for nothing. Not one penny are they investing. When we heard of this deal at the beginning of the year everyone assumed that the purpose was to get ICI to put in some of their money. Then we heard last spring that they were only putting in £2 million. We thought this was dreadful. Now we discover they are not putting in one penny. For no investment whatsoever they are getting 49 per cent control of a fertiliser company and we are asked in this Bill to increase the borrowing by £30 million. Why not ask ICI to put in the £30 million? It would be a good bargain for them. It would be well worth it to them to put in the £30 million themselves. They would have a 49 per cent stake in the company and they would have their £30 million in two or three years at the most. It would be a really good deal at £30 million but they are not asked to put in one penny and the Bill is brought here for us to increase the borrowings by another £30 million.

There is another part of the deal here which gives Richardsons the right to take — I have seen no mention of price — the ammonia. They

"would supply the Richardson plant in Belfast with ammonia about equal in quantity to that imported by Richardson's from the United Kingdom at present. This ammonia has been surplus to NET'S requirements and by its transfer to Belfast the necessity to sell it on the open market at whatever price it could obtain will be removed."

I just cannot understand what point the Minister is making there. He is telling us that by giving it away they do not have to sell it. He certainly does not say that they are selling the ammonia to Richardson's. Perhaps I am wrong and I would ask the Minister to clarify that. He simply says that they will supply that ammonia with which Richardson's can do what they like, sell it at their own profit. This does not go into the new IFI company but to Richardson's in Belfast. Unless the Minister can explain the manner in which that deal is to be made, this is an extraordinary give-away deal.

I must agree with Deputy Spring's remarks in regard to worker directors on the board of NET. These worker directors are there under the Worker Participation (State Enterprises) Act, 1977. By Statute they have to be on the NET board. Deputy Bruton totally disagreed with the manner in which they were acting on the board. They actually had the cheek to be present at all board meetings and be acting fully within their rights and capacity and according to him they should not have done that.

Mr. J. Bruton

That is not what I said.

Tomás Mac Giolla

They should have sat there meekly and said nothing, or have attended meetings now and again and not pretended that they knew anything. They participated fully on the board, as they had every right to do, as other people on boards have a right to. The vast majority of the boards in the public sector are made up of people from the public sector, from other public sector companies, where they can pursue their own interests on those boards. They have every right to pursue their own interests on those boards for their private profit and so also have the worker directors the right to pursue their interests fully. That is what the Workers Participation (State Enterprises) Act is all about. In NET the worker directors took their responsibilities very seriously. Elections for worker directors always had over a 90 per cent poll. Because they took their work seriously, they are being criticised by Deputy Bruton.

In the new set-up they are being left at the top, holding the debt of £180 million, with no participation whatsoever in the company underneath. They are not worker directors any more. They are sitting on this holding company, holding the baby, the debt, nothing else. One of the factors that ICI-Richardsons insisted on when making the deal with the Coalition Minister of the time was that there would not be any worker directors —"No workers directors for us. End of story." The Minister of the day conceded this. I agree with Deputy Spring's remarks with regard to worker directors, but regret that he did not express these at the Cabinet table, that he did not deal with that issue at the time when he had the opportunity. This joint venture between ICI and NET was the last act approved of by the Cabinet before the Labour Deputies left it. Why that joint venture agreement was agreed to without consultation with the worker directors, without having ensured that the worker directors would be on the new board, the board of the production company, I cannot understand. The discussion with them was minimal or nil, I am not sure which, but I think that it was nil. It seems that the whole Worker Participation (State Enterprises) Act is being rolled back and that this will be the guideline for the future in any privatisation efforts in which the Government intend to participate. Where there are public sector companies with worker directors, these will be pushed into a back room somewhere, with no participation whatsoever. The whole idea of that Act was that they would participate.

During the period when these worker directors were active — this is what Deputy Bruton was objecting to — the employment level in NET in 1980 was 1,498. This was reduced by January 1985 to 809, that is 600 fewer, and in that time turnover rose from £72.1 million in 1980 to £123.4 million in 1984 — under these worker directors. They were going for competitiveness; they were going for increased production because they knew that their company depended on it. They were not in any way obstructive on the NET board; they were most constructive, most helpful. In the whole industrialisation area the Minister will find that there will be great difficulties in this new company unless they pursue this issue of the right of worker directors to be on the board. We are moving into the 21st century and there is no point in trying to slide back into the 19th century, as seems to be the case with the PDs and some others following them. Unfortunately, Fianna Fáil are going back in the footsteps of the PDs.

Lastly, what will be the accountability to the Dáil in the new set-up? The Minister dealt with this but I am not quite sure what he meant. He said:

In this regard it will be the responsibility of NET to monitor the performance of IFI on behalf of the State and to keep the Government and this House informed as to its progress and the contribution it is making towards the servicing of NET's debt.

He continued:

In addition, the accounts of IFI will be incorporated into the annual accounts of NET.

Will the accounts of these two companies be shown separately and made clear? What does the Minister mean? To what extent shall we have full accounts from IFI to NET and to the House and to what extent will the Dáil, through the Government, be able to control or affect decisions which are being made by the board of IFI through NET?

Mr. M. Ahern

By bringing this Bill forward the Government recognise the importance of an indigenous fertiliser industry to this country because it is an agricultural one. To have fertiliser resources which are necessary to produce the maximum amount from our fields, it is important that there should be a native industry.

The reasons for the present troubles go back to the time of the construction of the Marino Point plant when the overruns were of enormous proportions. These overruns were due not alone to the main contractor but also to the many labour troubles which had been stirred up. There is no point in closing our eyes to the fact that during the construction of that plant there was a strike almost every day many of which were completely unjustified. Since then there have been improvements in the returns of the company with profits being shown in the years 1984 and 1985. The world market took a downturn in both 1986 and 1987 due to plants coming on stream in India and other Asian countries which resulted in an oversupply of the market.

The company suffered losses in 1986 and for the period up to the end of September 1987 and the company had no option but to look in a realistic manner over the last 18 months at how they could survive. There was only one way in which they could hope to survive and that was by supplying the full market in this country at least. The company were not producing compounds such as the ones being produced by Richardson's of Belfast. To supply the full market they needed capital investment and this was not on. They looked at the options available to them and chose to enter a joint venture with Richardson's with units in Cork, at Marino Point in Cobh, in Wicklow and in Belfast. That was the only option which the company had and they made a wise decision.

Besides looking at the supply of material the company also had to look at the number of its workforce. Their total workforce amounted to 667 with 277 persons being employed at Marino Point in Cobh, which is in my constituency. Both direct and indirect services such as haulage services, the manufacture of plastic bags, export services and the shipping industry gained from the setting up of NET and it would have been inexcusable of NET if they had not looked at ways of keeping the company in existence with the least amount of disruption to their workforce and to the other services which depended on them. If they did not take the best available option they would have had to take the blame for the consequences.

Deputy Bruton and Deputy Spring should stop codding the people. The previous Government were responsible for the deal which was done and in saying this I am not lecturing them or saying they were wrong.

Mr. J. Bruton

The Deputy was not here for my speech and I do not know how he can comment on it.

Mr. M. Ahern

I cannot understand how they can now act as if they do not know what is contained in the Bill.

Mr. J. Bruton

That is not what I am doing. It is quite clear that the Deputy did not listen to the speech he is now criticising.

Mr. M. Ahern

From meetings which were held over the past year and a half the worker directors knew what was coming and they cannot understand why the Labour Party have deserted them. I know some of the worker directors and they are of the highest character. It is a slur on the Labour Party to say that they did not support the inclusion of worker directors in the joint venture and is the height of hypocrisy to be raising questions about it now.

Mr. J. Bruton

The Deputy was not here for Deputy Spring's speech either.

Mr. M. Ahern

In conclusion, I welcome this Bill and I hope that as a result of this new joint venture NET will come through their present troubles and expand in the future.

Mr. Kavanagh

Let me say at the outset that the Labour Party support this Bill. Indeed, the Labour Party, as the previous speaker has said, were involved in the early discussions on the joint venture. While I was a Minister this matter was discussed. Deputy Spring and others in the Labour Party were also Ministers at that time. I am glad that the Government have decided to continue the policy of trying to bring forward a joint venture and to establish Irish Fertiliser Industries. The leader of my party, Deputy Spring, has spoken at length on this Bill. Earlier I attended the meeting of the Joint Committee on State-Sponsored Bodies and as a result I was unable to be here to present the case for the Labour Party. Deputy Spring made most of the points that I wished to make and therefore I can be relatively brief.

The assertions which were made by Deputy Ahern as to the part which was played by the Labour Party in the joint venture seem to be at odds with what actually happened. As I said, I welcome the setting up of this joint venture. When in Government I realised that we would not have NET or a fertiliser industry in this country if this possibility had not been looked at. I have represented Wicklow since 1969 and was a trade union official in Wicklow before NET were established. I had many associations with the setting up of the company in the Arklow area. In the good days over 1,200 full time and part time staff were employed by the company. It is a sad commentary that because of international competition and mistakes made about certain capital construction works and investment over the years the company is now laden with debts to the extent of £180 million. On any side of this House we could analyse why, suggest how those debts arose and cry crocodile tears, blaming different Administrations. The fact is that this company was established to do a particular job which it did successfully over a number of years. As I said in Wicklow, it was an excellent company providing employment in the town of Arklow for people from north Wexford and other rural areas including some from the town of Wicklow itself. It is sad to see the workforce now reduced to just over 300 but we should remember that it does mean the employment of 300 people in the Arklow area. Without the provisions of this Bill there would be involved another batch of redundancies if not the total elimination of the company.

I have sympathy with the Cork section of the company but I do represent Wicklow and have a bias in that direction. I do not mind declaring that bias. Nobody has ever declared their biases from these benches but I declare mine as a Deputy who has tried to build up this company and seen the ravages that have taken place as a result, first, of various decisions taken internally and, second, from the dumping of fertiliser on the European market.

When we first became a member of the EC we understood that Community preference constituted one of the cornerstones of the Common Agriculture Policy. However, we now find that community preference does not extend to the fertiliser industry which is so closely associated with agriculture and totally dependent on that industry for the purchase of its products. Because of the dumping of fertilisers from outside the Community all fertiliser industries within the Community are now experiencing difficulty. Those difficulties have brought about a unified response from the fertiliser industry within the Community. It is natural that another company operating on this island — I did not hear anybody comment that, for once, we see unity between the Six Counties and the Republic brought about within the parameters of one company — should be welcomed. In that respect I welcome that development. I welcome it also because I believe it to be the only vehicle that would ensure the survival of NET.

The workforce has been discussed at length here. Undoubtedly that workforce have produced the goods, have been reorganised to the extent that the various plant productions, in Arklow and in Cork, have been exceptional bearing in mind the reduced numbers employed. As recently as 1986 the production of CAN in the Arklow factory set a new record of 462,000 tons and the production of ammonia at Marino Point was way ahead of target. This information can be gleaned from the latest report of NET. Therefore it can be maintained that, at operation level, the workforce have produced the product at the most competitive price possible bearing in mind the cost of input. No matter how efficient any company producing fertiliser within the Community is at present it cannot withstand the dumping that has been going on in recent years from outside the Community. Therefore we have not alone the problem of a company here established by the State losing money but we appear to be powerless within the Community to prevent or arrest the problems common to the whole Community. While the proviso of Community preference was included in the Treaty of Rome it does not appear to operate in favour of that industry or in the circumstances in which it now finds itself.

Deputy Mac Giolla said he will oppose this Bill while, in the same breath, speaking highly of the workforce and advocating their maintenance in Arklow and Cork. I do not understand how one can deny a company the money it requires to continue its operations while at the same time being in favour of the maintenance of employment in the industry. It is not good enough to make a few comments about the Labour Party in Government, the influence of worker directors on the board while saying: I will vote against the Bill which will make worker directors still maintained by the company redundant. I am not sure how much one can say about discussions that took place in Cabinet while the Coalition Government were in office but when the relevant records are produced — after 30 years or whenever — they will show that the Labour Party did not sit quietly around that table without commenting on the position of worker directors either in NET or within what will be the new company which will be known as Irish Fertiliser Industries Limited. The records will demonstrate that the members of the Labour Party did indeed make their legitimate contribution on behalf of worker directors.

Mr. J. Bruton

There is no doubt about that.

Mr. Kavanagh

Nevertheless, having made that contribution, time has passed and there is now a different Government in office who must carry the responsibility. However, we are concerned about the position of worker directors in the new set-up.

I hope the Minister will comment on the points raised by Deputy Spring earlier. The House should remember that there was a meeting of the board of NET on 1 and 2 October from which the worker directors were excluded. I should like the Minister to investigate that matter because I know that decisions were taken at that meeting. I know that under paragraph 94 of the Articles of Association of NET and the provisions of the Companies Act those worker directors should not have been excluded from that meeting and any decisions taken at it. I believe any decisions taken at that meeting are void because those worker directors were excluded. I have it in writing from a worker director that they were excluded. Since the new company has been established those worker directors involved in the NET side of the operations have been told that they cannot attend to worker director duties in company time, a practice engaged in in the past. They have been refused accepting telephone calls relating to worker participation business and have had their office facilities withdrawn. Indeed, they are not allowed to communicate with other company employees in company time. Therefore, it will be seen that there has been a change in approach to worker directors in recent times, something I hope the Minister will investigate. I hope the Minister has a commitment to worker directors because their commitment to this and other public companies has been beneficial.

Reverting to the Bill before the House, it was wrong for Deputy Mac Giolla to contend that no debt commitment had been passed on from the original company to the present one. The Minister said in his introductory remarks that £20 million had been taken off the debt commitment and passed on to the new company. So I assume that that is apportioned between the two companies who have now joined forces to make a new company. I hope that this company will make progress so that they can pay off the original debt and ensure the continuation and expansion of employment in both Wicklow and Cork. As my colleague, Deputy Jacob from Wicklow, has said, employment has diminished substantially in the last eight to ten years not only in NET but also in other companies particularly in the Arklow area and other areas including my town of Wicklow. I hope that the Minister listens to the proposal the Deputy made about the designated area for Wicklow. It will stand investigation. The problems of unemployment there and right across the county demand some sort of reaction from the Minister considering the situation in the Dublin port area. We hope that the Minister will consider County Wicklow where unemployment and emigration are as grave as in any other part of the country.

We support this Bill. Questions have been asked about the joint venture which require answers but I come in here with a certain bias because I represent a constituency that has been ravaged by redundancy in this its largest industry. I hope this new venture will be a success.

Acting Chairman (Mr. M. Barrett)

I call on Deputy Richard Bruton.

Mr. R. Bruton

I want to intervene briefly——

Mr. Reynolds

Is it proposed to finish Second Stage by 7 o'clock this evening? I thought there was general agreement on that.

Acting Chairman

Yes, that is right.

Mr. Reynolds

Will I get a few minutes?

Acting Chairman

I am advised that no order was made by the House.

Mr. Reynolds

There was general agreement.

A Deputy

I understand there was unofficial agreement.

Acting Chairman

Is there general agreement?

Mr. J. Bruton

If Second Stage was finished we would go on to Committee Stage. There would be no delay between Second Stage and Committee Stage. That was all we agreed to. If this debate finishes we will go on to Committee Stage.

Mr. Reynolds

We know that it will not finish.

Mr. J. Bruton

I had a conversation with the Minister's private secretary and that was the agreement. There was no agreement as to how long the debate would go on.

Mr. R. Bruton

I am not going to delay the House anyhow but let me say that this raises an important issue in energy as well as in industry. It is good to see that this agreement is being put together and that we can continue the company in operation. It is right to regard past investments, be they mistaken or not, as some cost. However, the key issue is that NET must pay a price comparable with the best alternative use of gas that is available to us. After all, gas is a very scarce natural resource which we have available to us. It is due to run out in ten years and NET have not been regarded as a prime user. Therefore, it is crucial in any agreement that the price be on a commercial basis representing the best alternative use available of that gas. Any other agreement would be selling the people short in regard to their natural resources.

Despite what the Minister said, that the price would be on a commercial basis, in his own party's manifesto published before the last election there is quite an explicit statement that they will deviate from the principle of commercial pricing in order to help certain industries. I would like an assurance from the Minister that there will not be a deviation from pricing natural gas sensibly, namely at the best alternative use available to people, in selling it to this new joint venture company, and that we will not see some deal made subsequently if the company find themselves in trading difficulties when the price will be marked down. That seems to be suggested in the Fianna Fáil policy.

Minister for Industry and Commerce (Mr. Reynolds)

When I came into power I had two options. The first was to accept and put through the agreement and the decision of the previous Government who negotiated every detail of this agreement and concluded and approved it in January 1987. It beats me to hear people asking questions here about various details of these negotiations that went on for a couple of years when the parties who ask the questions knew every single bit of information that was available then. Nothing has changed since. The other option was to close down NET because the Government had no funds to put into it. It is quite clear that the second option was to break the agreement which the previous Government had concluded. They come in here and talk about Government guarantees and about me opting for a Government guarantee when the Government decision in January 1987 was, as I spelled out in my speech in this House, to look for money from the banks without a Government guarantee to do this deal.

Mr. R. Bruton

Yes.

Mr. Reynolds

But they continued to say that if those terms were not acceptable to the Minister for Finance and the Minister for Industry and Commerce I should proceed to give a Government guarantee by legislation in this House. That is the purpose of the Bill before this House.

Mr. J. Bruton

Why were the terms not acceptable?

Mr. Reynolds

The terms were unacceptable for two reasons. One was that they were charging over and above the rate that anybody in his right senses would pay. That would add an additional cost between £120,000 and £200,000 per annum. Secondly, they were looking for a different type of security. If Deputy Bruton were here he would not have given it to them either. Neither of the two Deputies Bruton would have agreed to this additional security.

Mr. J. Bruton

One cannot say that unless one knows what the terms were.

Mr. Reynolds

I have given the cost of the additional terms per annum, and I said that they were looking for additional securities apart from a Government grant.

Mr. J. Bruton

What were they?

Mr. Reynolds

They wanted a mortgage on the gas contract. That explains very clearly why——

Mr. J. Bruton

That is really the same as a State guarantee.

Mr. Reynolds

Nearly, but not. To take bad terms with that, which is close enough to what the Deputy is talking about, to take the new terms, the much reduced terms with a State guarantee was the second option. I expressed it quite clearly in my speech. There are a number of questions here that I will not have time to answer this evening but I will be quite happy to answer them on Committee Stage. However, let me say that we have appointed a very good board of directors to this company. They are four of our top class businessmen. I will not name them because everybody knows who they are. I was questioned about their remuneration. The question of their remuneration never arose. Those people are prepared to give their time and services to work hard to turn a company around from their difficulties into a profitable Irish company for the Irish nation.

Many other questions were raised here and I will deal with them on Committee State.

Mr. J. Bruton

On a point of order, if the Minister does not propose to deal with some of the questions that were raised in regard to the fertiliser industry——

Mr. Reynolds

I did not——

Mr. J. Bruton

——not on this Stage but on Committee Stage can I ask you, Sir, for an assurance that in the event that he attempts to answer these questions that were asked on Second Stage he will not be ruled out of order on the basis——

An Ceann Comhairle

We will be proceeding to other business in two minutes.

Mr. Reynolds

I am completing Second Stage and I will answer all the questions.

Mr. J. Bruton

That is not the question. I am asking on a point of order——

Mr. Reynolds

If that is the game the Deputy is playing——

Mr. J. Bruton

I want to know, Sir, from you and not from the Minister, if I put questions in regard to the fertiliser industry, the prospects for the industry and so on, on Committee Stage which the Minister has promised to answer at that Stage, these will not be ruled out of order by you as being irrelevant.

An Ceann Comhairle

That is purely hypothetical, Deputy. Let us see your questions or amendments at that Stage.

Question put and agreed to.

An Ceann Comhairle

When is it intended to take Committee Stage?

Mr. Reynolds

Next week, subject to agreement between the Whips.

Committee Stage ordered for Tuesday, 10 November 1987.