That Dáil Éireann approves the following Order in draft:
State Guarantees Act, 1954 (Amendment of Schedule) Order, 1991,
a copy of which Order in draft was laid before the Dáil on 27th february, 1991.
The Resolution arises from the application from the Waterford Harbour Commissioners that borrowings of up to £10 million over 15 years in connection with the Belview harbour development plan be guaranteed by the State.
Waterford Harbour is one of Ireland's premier commercial ports. It is one of the key ports on which our commercial harbours policy is based. The principal objectives of this policy in the medium-term are: (a) to ensure that Ireland has sufficient port facilities to meet the anticipated increase in trade expected following the completion of the Single Market.
As Deputies will be aware, we are very anxious to increase our access to Europe, and we perceive Waterford as a major port in that regard. The foregoing objectives are being pursued principally through an investment in commercial ports of approximately £69 million in the years 1989 to 1993. This investment is being funded in part by the EC through the Operational Programme on Peripherality. The programme is assisting projects at the key ports of Cork, Dublin, Rosslare and Waterford and at other important local ports. The Waterford project is the largest single project in this programme. These measures when implemented could have the effect of winning back some of the substantial Republic of Ireland traffic that has moved to Northern Ireland ports.
Waterford Harbour handles more than 30 per cent of Ireland's Lo-Lo, lift-on/lift-off, container traffic. Containerised traffic through the port of Waterford has more than doubled in recent years reaching 130,000 TEUs — unit of measurement of container traffic TEU — twenty foot equivalent unit — in 1991 and this throughput is set to increase dramatically in the coming years — throughput in 2005 is estimated at 275,000 TEUs. But this cannot be achieved at the present terminal which has a design capacity of 80,000 TEUs. Deputies will note that it is already being used up to a volume of 130,000 TEUs.
To cater for the proposed dramatic increase in container throughput Waterford Harbour Commissioners are about to embark on a major Lo-Lo harbour development plan at Belview, County Kilkenny, four miles downriver from Waterford, at a cost in excess of £20 million. The plan comprises major capital dredging, the construction of a 450 metre container wharf, container cranes, container compounds, stockpile areas, internal roads, railway sidings, access road and other ancillary works. Full planning permission has been obtained by Waterford Harbour Commissioners.
Provision has been made in the National Development Plan and in the Operational Programme on Peripherality for expenditure by Waterford Harbour Commissioners of £15 million between now and 1993 on the provision of the harbour element of the facilities. EC aid totalling £7.5 million has been approved, in principle, towards the cost. Prospects are good that the rail — £1.36 million — and road —£3 million — links to Belview will also qualify for EC aid under the road and rail elements of the Operational Programme on Peripherality. The first tranche, based on expenditure to date of EC grant aid — £458,000 — towards the cost of the project was paid to Waterford Harbour Commissioners in November 1990. In addition, and as an exceptional measure, State grant assistance of £200,000 was paid to Waterford Harbour Commissioners in 1990 in respect of expenditure already incurred on the project. Commercial borrowings totalling £705,500 in respect of essential preliminary works have been drawn down by the commissioners with my approval and that of the Minister for Finance in accordance with section 120 of the Harbours Act, 1946. The second tranche — £418,000 — of EC grant aid was paid to the commissioners on 9 October 1991. A further tranche — £82,000 — of EC aid was paid to the commissioners in February 1992.
I am satisfied that the Belview project is justified, the present Lo-Lo container terminal having a design capacity of 80,000 TEUs; in 1991 it handled 130,000 TEUs. Because the existing terminal is being overutilised there is a very real danger that the wharf will be undermined to such an extent that it will have to be taken out of commission. Due to lack of capacity traffic is being forced away from Waterford, the service to customers being adversely affected. Indeed I should say the volume of traffic has been accommodated only by a seven days per week, 24-hour operation.
The Belview Lo-Lo container terminal, when operational, will reduce by one hour sailing time between Waterford Harbour and UK and Continental ports, will enable three ships to be worked simultaneously, will have flexible working arrangements — 24 hours per day, seven days per week, 364 days per year — which will result in a quicker ship turnaround time and, thus, reduce costs to users. The Lo-Lo handling capacity of Waterford port will increase to 320,000 TEUs per annum.
While essential preliminary works, e.g. capital dredging, have been undertaken, actual construction works have not yet commenced. In 1991 Waterford Harbour Commissioners invited tenders for the wharf construction — £7.5 million — and crane acquisition — £3.7 million. While the commissioners have issued letters of intent to the successful tenderers — Ascon for the wharf and Davy Morris UK Ltd. for the crane — the contracts have not yet been awarded as certain necessary formalities have not been completed. These are: a financial package for the project still having to be finalised and the commissioners have not as yet executed an agreement with Bells Lines Ltd., the intended main user of Belview, whereby Bells will effectively undertake to service commercial borrowings of up to £10 million by the commissioners. The final draft of the agreement which is subject to approval by me is at present under consideration.
The draft agreement provides that Bell Lines will provide sufficient income to the commissioners to enable the interest and capital cost of borrowings up to a maximum of £8.5 million for a one crane operation and £10 million for a two crane operation to be discharged over 15 years; in addition, harbour rates in respect of guaranteed minimum throughputs will be paid by Bells to the commissioners. These harbour rates will be increased annually in line with, or related to the increase in the CPI. In return Bells will have priority, though not exclusive use, of the Belview container terminal. Thus it can be seen that the agreement will underwrite all of the outgoings on the borrowings Waterford Harbour Commissioners could not have undertaken out of their income of approximately £1.5 million per annum. If traffic falls off for reasons other than force majeure or if Bells decide not to continue using Waterford they would still be legally bound to meet the capital and interest repayments. Without this agreement Waterford Harbour Commissioners would not be in a position to undertake the project on their own because of their present financial circumstances.
I should mention that the agreement also provides that Bells will continue to enjoy the use of the existing container terminal, the Frank Cassin Wharf. Of importance here is the fact that the management and operational structures currently in place at the Frank Cassin Wharf and which have been so successful, will continue. Once Bells transfer their operations to Belview, the Frank Cassin Wharf will be available to other container operators and both Waterford Harbour Commissioners and Bells are anxious to attract such operators to this wharf.
The original proposal was that the project, apart from any EC aid secured would be funded jointly by Waterford Harbour Commissioners and Bells. The financing arrangements concluded by both parties were not acceptable to the EIB or lending institutions here. Attempts by the commissioners to secure borrowings without a State guarantee for all or part of the proposed borrowings were unsuccessful. The Harbours Acts do not provide for borrowings by harbour authorities to be guaranteed by the State. In the absence of such a provision in the Acts a guarantee can only be provided under the State Guarantees Act, 1954.
Bell Lines have been associated with Waterford Harbour since the 1960's and have spearheaded the drive to make Lo/Lo more cost effective nationally. During all that time Bell Lines have achieved all of the projected growth figures they have given Waterford Harbour Commissioners and they have also fully honoured all their financial obligations to the commissioners.
The financial viability of Waterford Harbour Commissioners is heavily dependent on Bells continued association with the port. Ownership of the Belview site is vested in Waterford Harbour Commissioners; likewise, ownership of the new wharf, cranes and on-shore facilities will be vested in the commissioners. Bells will be required to pay harbour rates to the commissioners and the Bell operation will continue to be subject to full compliance with the by-laws of the commissioners.
The established policy is that each harbour authority, including Waterford, should be operated as a commercial undertaking and should be financially self-supporting. Harbour authorities should conduct their affairs so as to ensure that revenues are not less than sufficient to remunerate capital and repay borrowings. The proposal now before the House is that the Schedule to the State Guarantees Act, 1954, be amended so that borrowings by Waterford Harbour Commissioners can be guaranteed by the State. This exceptional measure is warranted, in view of the significance of Waterford port, its impressive track record, and its unique place in efficient Lo/Lo development.
I am prepared to recommend that borrowings of £10 million by Waterford Harbour Commissioners be guaranteed by the State because of the scale of the Belview project — total investment will amount to in excess of £20. The project is important from the point of view of improvements to overall access transport infrastructure. It will reduce by one hour the sailing time between Waterford Harbour and UK and continental ports and thus reduce costs to importers and exporters. I am satisfied that without such a guarantee the project will not proceed.
The Belview Harbour development plan is being strongly supported for EC aid — EC aid of £7.5 million has already been approved in principle and further EC aid is under consideration.
The national advantage dictates the development of Waterford port. This view has been confirmed by an independent evaluation recently commissioned by my Department on the financial aspects of the project.
I have pleasure in recommending the Resolution to the House.